(ii) Advise Clifford of the capital gains tax implications of the alternative of selling the Oxford house andgarden by means of two separate disposals as proposed. Calculations are not required for this part ofthe question. (3 marks)
题目
(ii) Advise Clifford of the capital gains tax implications of the alternative of selling the Oxford house and
garden by means of two separate disposals as proposed. Calculations are not required for this part of
the question. (3 marks)
相似考题
参考答案和解析
(ii) The implications of selling the Oxford house and garden in two separate disposals
The additional sales proceeds would result in an increase in Clifford’s capital gains and consequently his tax liability.
When computing the gain on the sale of the house together with a small part of the garden, the allowable cost would
be a proportion of the original cost. That proportion would be A/A + B where A is the value of the house and garden
that has been sold and B is the value of the part of the garden that has been retained. Principal private residence relief
and taper relief would be available in the same way as that set out in (i) above.
When computing the gain on the sale of the remainder of the garden, the cost would be the original cost of the property
less the amount used in computing the gain on the earlier disposal. Principal private residence relief would not be
available as the land sold is not a dwelling house or part of one.
更多“(ii) Advise Clifford of the capital gains tax implications of the alternative of selling the Oxford house andgarden by means of two separate disposals as proposed. Calculations are not required for this part ofthe question. (3 marks)”相关问题
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第1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)
正确答案：
(c) (i) Paper for paper rules
The proposed transaction broadly falls under the ‘paper for paper’ rules. Where this is the case, chargeable gains do not
arise. Instead, the new holding stands in the shoes (and inherits the base cost) of the original holding.
The company issuing the new shares must:
(i) end up with more than 25% of the ordinary share capital (or a majority of the voting power) of the old company,
OR
(ii) make a general offer to shareholders in the other company with a condition that, if satisfied, would give the
acquiring company control of the other company.
The exchange must be for bona fide commercial reasons and must not have as its main purpose (or one of its main
purposes) the avoidance of CGT or corporation tax. The acquiring company can obtain advance clearance from the
Inland Revenue that the conditions will be met.
If part of the offer consideration is in the form. of cash, a gain must be calculated using the part disposal rules. If the
cash received is not more than the higher of ￡3,000 or 5% of the total value on takeover, then the amount received in
cash can be deducted from the base cost of the securities under the small distribution rules. -
第2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)
正确答案：
(ii) Exercising of share options
The share option is not part of an approved scheme, and will not therefore enjoy the benefits of such a scheme. There
are three events with tax consequences – grant, exercise and sale.
Grant. If shares or options over shares are sold or granted at less than market value, an income tax charge can arise on
the difference between the price paid and the market value. [Weight v Salmon]. In addition, if options can be exercised
more than 10 years after the date of the grant, an employment income charge can arise. This is based on the market
value at the date of grant less the grant and exercise priced.
In Henry’s case, the options were issued with an exercise price equal to the then market value, and cannot be exercised
more than 10 years from the grant. No income tax charge therefore arises on grant.
Exercise. On exercise, the individual pays the agreed amount in return for a number of shares in the company. The price
paid is compared with the open market value at that time, and if less, the difference is charged to income tax. National
insurance also applies, and the company has to pay Class 1 NIC. If the company and shareholder agree, the national
insurance can be passed onto the individual, and the liability becomes a deductible expense in calculating the income
tax charge.
In Henry’s case on exercise, the difference between market value (￡14) and the price paid (￡1) per share will be taxed
as income. Therefore, ￡130,000 (10,000 x (￡14 – ￡1)) will be taxed as income. In addition, national insurance will
be chargeable on the company at 12·8% (￡16,640) and on Henry at the rate of 1% (￡1,300).
Sale. The base cost of the shares is taken to be the market value at the time of exercise. On the sale of the shares, any
gain or loss arising falls under the capital gains tax rules, and CGT will be payable on any gain. Business asset taper
relief will be available as the company is an unquoted trading company, but the relief will only run from the time that
the share options are exercised – i.e. from the time when the shares were acquired.
In Henry’s case, the sale of the shares will immediately follow the exercise of the option (6 days later). The sale proceeds
and the market value at the time of exercise are likely to be similar; thus little to no gain is likely to arise. -
第3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)
正确答案：
(a) Capital gains that may arise on the sale by Belgrove Ltd of shares in Hira Ltd
Belgrove Ltd will realise a capital gain on the sale of the shares unless the substantial shareholding exemption applies. The
exemption will be given automatically provided all of the following conditions are satisfied.
– Belgrove Ltd has owned at least 10% of Hira Ltd for a minimum of 12 months during the two years prior to the sale.
– Belgrove Ltd is a trading company or a member of a trading group during that 12-month period and immediately after
the sale.
– Hira Ltd is a trading company or the holding company of a trading group during that 12-month period and immediately
after the sale.
Hira Ltd will no longer be in a capital gains group with Belgrove Ltd after the sale. Accordingly, a capital gain, known as a
degrouping charge, may arise in Hira Ltd. A degrouping charge will arise if, at the time it leaves the Belgrove Ltd group, Hira
Ltd owns any capital assets which were transferred to it at no gain, no loss within the previous six years by a member of the
Belgrove Ltd capital gains group. -
第4题：
(d) Explain how Gloria would be taxed in the UK on the dividends paid by Bubble Inc and the capital gains tax
and inheritance tax implications of a future disposal of the shares. Clearly state, giving reasons, whether or
not the payment made to Eric is allowable for capital gains tax purposes. (9 marks)
You should assume that the rates and allowances for the tax year 2005/06 apply throughout this question.
正确答案：
(d) UK tax implications of shares in Bubble Inc
Income tax
Gloria is UK resident and is therefore subject to income tax on her worldwide income. However, because she is non-UK
domiciled, she will only be taxed on the foreign dividends she brings into the UK.
Dividends brought into the UK will be grossed up for any tax paid in Oceania. The gross amount is taxed at 10% if it falls
into the starting or basic rate band and at 321/2% if it falls into the higher rate band. The tax suffered in Oceania is available
for offset against the UK tax liability. The offset is restricted to a maximum of the UK tax on the dividend income.
Capital gains tax
Individuals are subject to capital gains tax on worldwide assets if they are resident or ordinarily resident in the UK. However,
because Gloria is non-UK domiciled and the shares are situated abroad, the gain is only taxable to the extent that the sales
proceeds are brought into the UK. Any tax suffered in Oceania in respect of the gain is available for offset against the UK
capital gains tax liability arising on the shares.
Any loss arising on the disposal of the shares would not be available for relief in the UK.
In computing a capital gain or allowable loss, a deduction is available for the incidental costs of acquisition. However, to be
allowable, such costs must be incurred wholly and exclusively for the purposes of acquiring the asset. The fee paid to Eric
related to general investment advice and not to the acquisition of the shares and therefore, would not be deductible in
computing the gain.
Taper relief will be at non-business asset rates as Bubble Inc is an investment company.
Inheritance tax
Assets situated abroad owned by non-UK domiciled individuals are excluded property for the purposes of inheritance tax.
However, Gloria will be deemed to be UK domiciled (for the purposes of inheritance tax only) if she has been resident in the
UK for 17 out of the 20 tax years ending with the year in which the disposal occurs.
Gloria has been running a business in the UK since June 1992 and would therefore, appear to have been resident for at least
15 tax years (1992/93 to 2006/07 inclusive).
If Gloria is deemed to be UK domiciled such that the shares in Bubble Inc are not excluded property, business property relief
will not be available because Bubble Inc is an investment company. -
第5题：
(c) Explain the capital gains tax (CGT) and income tax (IT) issues Paul and Sharon should consider in deciding
which form. of trust to set up for Gisella and Gavin. You are not required to consider inheritance tax (IHT) or
stamp duty land tax (SDLT) issues. (10 marks)
You should assume that the tax rates and allowances for the tax year 2005/06 apply throughout this question.
正确答案：
(c) As the trust is created in the settlors’ (Paul and Sharon’s) lifetime its creation will constitute a chargeable disposal for capital
gains tax. Also, as the settlors and trustees are connected persons, the disposal will be deemed to be at market value, resulting
in a chargeable gain of ￡80,000 (160,000 – 80,000). No taper relief will be available as the property is a non-business
asset, and has been held for less than three years, but annual exemptions of ￡17,000 (2 x ￡8,500) will be available.
However, in the case of a discretionary trust, gift hold over relief will be available. This is because the gift will constitute a
chargeable lifetime transfer and because there is an immediate charge to inheritance tax (even though no tax is payable due
to the nil rate band) relief is available if a specific accumulation and maintenance trust is used, as in this case the gift will
qualify as a potentially exempt transfer and so gift relief would only be available in respect of business assets. The use of a
basic discretionary trust will thus facilitate the deferral of an immediate capital gains tax charge of ￡25,200 (63,000 x 40%).
If/when the property is disposed of, however, the trustees will pay capital gains tax on the deferred gain at the trust income
tax rate of 40%, and have an annual exemption of only ￡4,250 (50% of the normal individual rate) available to them. The
40% rate of tax and lower annual exemption rate also apply to chargeable gains arising in a specific accumulation and
maintenance trust, as well as a basic discretionary trust.
A chargeable disposal between connected persons will also arise for the purposes of capital gains tax if/when the property
vests in a beneficiary, i.e. one or more of the beneficiaries becomes absolutely entitled to all or part of the income or capital
of the trust. Gift hold over relief will again be available on all assets in the case of a discretionary trust, but only on business
assets in the case of an accumulation and maintenance trust, except where a beneficiary becomes entitled to both income
and capital at the same time.
The trust will have taxable property income in the form. of net rents from its creation and in future years is also likely to have
other investment income, probably in the form. of interest, to the extent that monies are retained in the trust. Whichever form
of trust is used, the trustees will pay tax at the standard trust rate of 40% on income other than dividend income (32·5%),
except to the extent of (1) the first ￡500 of taxable income, which is taxed at the rate that would otherwise apply to such
income (i.e. 22% for non-savings (rental) income, 20% for savings income (interest) and 10% for dividends) but, only to the
extent that it is not distributed; and (2) the legitimate trust management expenses, which are offsettable for the purposes of
the higher trust tax rates against the income with the lowest rate(s) of normal tax and so bear tax only at that rate. The higher
trust tax rate always applies to income that is distributed, other than to the extent that it has been treated as the settlor’s
income, and taxed at that settlor’s marginal tax rate.
As Paul and Sharon intend to create a trust for their unmarried minor (under 18) children, then even if the trust specifically
excludes them from any benefit under the trust, the trust income will be treated as theirs for income tax purposes to the extent
that it constitutes income paid for on behalf (including maintenance payments) of Gisella and Gavin; except where (1) the
total income arising does not exceed ￡100 gross per annum, and (2) income is held for the benefit of a child under an
accumulation and maintenance settlement, to the extent that it is not paid out. -
第6题：
(ii) Advise Andrew of the tax implications arising from the disposal of the 7% Government Stock, clearly
identifying the tax year in which any liability will arise and how it will be paid. (3 marks)
正确答案：
(ii) Government stock is an exempt asset for the purposes of capital gains tax, however, as Andrew’s holding has a nominal
value in excess of ￡5,000, a charge to income tax will arise under the accrued income scheme. This charge to income
tax will arise in 2005/06, being the tax year in which the next interest payment following disposal falls due (20 April
2005) and it will relate to the income accrued for the period 21 October 2004 to 14 March 2005 of ￡279 (145/182
x ￡350). As interest on Government Stock is paid gross (unless the holder applies to receive it net), the tax due of ￡112
(￡279 x 40%) will be collected via the self-assessment system and as the interest was an ongoing source of income
will be included within Andrew’s half yearly payments on account payable on 31 January and 31 July 2006. -
第7题：
(b) Calculate Alvaro Pelorus’s capital gains tax liability for the tax year 2006/07 on the assumption that all
available reliefs are claimed. (8 marks)
正确答案：
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第8题：
(ii) Analyse the effect of delaying the sale of the business of the Stiletto Partnership to Razor Ltd until
30 April 2007 on Clint’s income tax and national insurance position.
You are not required to prepare detailed calculations of his income tax or national insurance liabilities.
(4 marks)
正确答案：(ii) The implications of delaying the sale of the business
The implications of delaying the sale of the business until 30 April would have been as follows:
– Clint would have received an additional two months of profits amounting to ￡6,920 (￡20,760 x 1/3).
– Clint’s trading income in 2006/07 would have been reduced by ￡13,015 (￡43,723 – ￡30,708), much of which
would have been subject to income tax at 40%. His additional trading income in 2007/08 of ￡19,935 would all
have been taxed at 10% and 22%.
– Clint is entitled to the personal age allowance of ￡7,280 in both years. However, it is abated by ￡1 for every ￡2
by which his total income exceeds ￡20,100. Once Clint’s total income exceeds ￡24,590 (￡20,100 + ((￡7,280
– ￡5,035) x 2)), his personal allowance will be reduced to the standard amount of ￡5,035. Accordingly, the
increased personal allowance would not be available in 2006/07 regardless of the year in which the business was
sold. It is available in 2007/08 (although part of it is wasted) but would not have been if the sale of the business
had been delayed.
– Clint’s class 4 national insurance contributions in 2006/07 would have been reduced due to the fall in the level
of his trading income. However, much of the saving would be at 1% only. Clint is not liable to class 4 national
insurance contributions in 2007/08 as he is 65 at the start of the year.
– Changing the date on which the business was sold would have had no effect on Clint’s class 2 liability as he is
not required to make class 2 contributions once he is 65 years old.
-
第9题：
(ii) Advise Mr Fencer of the income tax implications of the proposed financing arrangements. (2 marks)
正确答案：
(ii) The income tax implications of the proposed financing arrangements
Mr Fencer has borrowed money from a UK bank in order to make a loan to Rapier Ltd, a close company. The interest
paid by Mr Fencer to the bank will be an allowable charge on income as long as he continues to hold more than 5% of
Rapier Ltd. Charges on income are deductible in arriving at an individual’s statutory total income.
Mr Fencer will receive interest from Rapier Ltd net of 20% income tax. The gross amount of interest will be subject to
income tax at either 10%, 20% or 40% depending on whether the income falls into Mr Fencer’s starting rate, basic rate
or higher rate tax band. Mr Fencer will obtain a tax credit for the 20% income tax suffered at source. -
第10题：
(c) Explanatory notes, together with relevant supporting calculations, in connection with the loan. (8 marks)
Additional marks will be awarded for the appropriateness of the format and presentation of the schedules, the
effectiveness with which the information is communicated and the extent to which the schedules are structured in
a logical manner. (3 marks)
Notes: – you should assume that the tax rates and allowances for the tax year 2006/07 and for the financial year
to 31 March 2007 apply throughout the question.
– you should ignore value added tax (VAT).
正确答案：
(c) Tax implications of there being a loan from Flores Ltd to Banda
Flores Ltd should have paid tax to HMRC equal to 25% of the loan, i.e. ￡5,250. The tax should have been paid on the
company’s normal due date for corporation tax in respect of the accounting period in which the loan was made, i.e. 1 April
following the end of the accounting period.
The tax is due because Flores Ltd is a close company that has made a loan to a participator and that loan is not in the ordinary
course of the company’s business.
HMRC will repay the tax when the loan is either repaid or written off.
Flores Ltd should have included the loan on Banda’s Form. P11D in order to report it to HMRC.
Banda should have paid income tax on an annual benefit equal to 5% of the amount of loan outstanding during each tax
year. Accordingly, for each full year for which the loan was outstanding, Banda should have paid income tax of ￡231
(￡21,000 x 5% x 22%).
Interest and penalties may be charged in respect of the tax underpaid by both Flores Ltd and Banda and in respect of the
incorrect returns made to HMRC
Willingness to act for Banda
We would not wish to be associated with a client who has engaged in deliberate tax evasion as this poses a threat to the
fundamental principles of integrity and professional behaviour. Accordingly, we should refuse to act for Banda unless she is
willing to disclose the details regarding the loan to HMRC and pay the ensuing tax liabilities. Even if full disclosure is made,
we should consider whether the loan was deliberately hidden from HMRC or Banda’s previous tax adviser.
In addition, companies are prohibited from making loans to directors under the Companies Act. We should advise Banda to
seek legal advice on her own position and that of Flores Ltd. -
第11题：
(b) Prepare a reasoned explanation of how any capital gains tax arising in the UK on the sale of the paintings
can be minimised. (2 marks)
正确答案：
(b) Minimising capital gains tax on the sale of the paintings
Galileo will become resident and ordinarily resident from the date he arrives in the UK as he intends to stay for more than
three years. Prior to that date he will be neither resident nor ordinarily resident such that he will not be subject to UK capital
gains tax.
Galileo should sell the paintings before he leaves Astronomeria; this will avoid UK capital gains tax completely.
Tutorial note
The gains would be taxable on the remittance basis if the paintings were sold after Galileo’s arrival in the UK. However, this
would not help Galileo to minimise the capital gains tax due as he needs to bring the sales proceeds into the UK in order
to purchase a house. -
第12题：
(c) (i) Calculate Benny’s capital gains tax liability for 2006/07. (6 marks)
正确答案：
-
第13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.
正确答案：
-
第14题：
(ii) Advise Benny of the amount of tax he could save by delaying the sale of the shares by 30 days. For the
purposes of this part, you may assume that the benefit in respect of the furnished flat is ￡11,800 per
year. (3 marks)
正确答案：
-
第15题：
(c) (i) Compute Gloria’s capital gains tax liability for 2006/07 ignoring any claims or elections available to
reduce the liability. (3 marks)
正确答案：
-
第16题：
(ii) Assuming the relief in (i) is available, advise Sharon on the maximum amount of cash she could receive
on incorporation, without triggering a capital gains tax (CGT) liability. (3 marks)
正确答案：
(ii) As Sharon is entitled to the full rate of business asset taper relief, any gain will be reduced by 75%. The position is
maximised where the chargeable gain equals Sharon’s unused capital gains tax annual exemption of ￡8,500. Thus,
before taper relief, the gain she requires is ￡34,000 (1/0·25 x ￡8,500).
The amount to be held over is therefore ￡46,000 (80,000 – 34,000). Where part of the consideration is in the form
of cash, the gain eligible for incorporation relief is calculated using the formula:
Gain deferred = Gain x value of shares issued/total consideration
The formula is manipulated on the following basis:
￡46,000 = ￡80,000 x (shares/120,000)
Shares/120,000 = ￡46,000/80,000
Shares = ￡46,000 x 120,000/80,000
i.e. ￡69,000.
As the total consideration is ￡120,000, this means that Sharon can take ￡51,000 (￡120,000 – ￡69,000) in cash
without any CGT consequences. -
第17题：
(b) Advise on the capital gains implications should Trent Limited’s old building be sold as proposed. Support your
advice with relevant calculations. (4 marks)
正确答案：
This gives a higher post-entry loss of ￡50,000 (150,000 – 100,000) and so it is advisable for Trent Limited to make
this election.
The ￡100,000 of pre-entry losses are still available, but can only be set against gains on assets which:
(i) Trent Limited sold prior to being acquired (subject to the normal carry back restrictions), or
(ii) Trent Limited already owned when it was acquired, or
(iii) Trent Limited acquired from outside the group and used in its trade after being bought by Tay Limited. -
第18题：
(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)
正确答案：
(b) (i) Andrew may be able to take advantage of tax reliefs under the enterprise investment scheme (EIS) provided the
necessary conditions are met. The conditions that have to be satisfied before full relief is available fall into three areas,
and broadly require that a ‘qualifying individual’ subscribes for ‘eligible shares’ in a ‘qualifying company’.
‘Qualifying Individual’
To be a qualifying individual, Andrew must not be connected with the EIS company. This means that he should not be
an employee (or, at the time the shares are issued, a director) or have an interest in (i.e. control) 30% or more of the
capital of the company. These conditions need to be satisfied throughout the period beginning two years before the share
issue and three years after the ‘relevant date’. Where the relevant date is defined as the later of the date the shares were
issued and the date on which the company commenced trading.
Andrew does not intend to become an employee (or director) of Scalar Limited, but he needs to exercise caution as to
how many shares he subscribes for. If only three investors subscribe for 100% of the shares, each will hold 33% of the
share capital. This exceeds the 30% limit and will mean that EIS relief (other than deferral relief) will not be available.
Therefore, Andrew and the other two investors should ensure not only that the potential fourth investor is recruited, but
that s/he subscribes for sufficient shares, such that none of them will hold 30% or more of the issued share capital, as
only then will they all attain qualifying individual status.
‘Eligible shares’
Qualifying shares need to be new ordinary shares which are subscribed for in cash and fully paid up at the time of issue.
The shares must not be redeemable for at least three years from the relevant date, and not carry any preferential rights
to dividends. On the basis of the information provided, the shares of Scalar Limited would qualify as eligible shares.
‘Qualifying Company’
The company must be unquoted, not controlled by another company, and engaged in qualifying business activities. The
latter requires that the company engage in a trading activity, which is carried on wholly or mainly in the UK, throughout
the three years following the relevant date. While certain trading activities, such as dealing in shares or trading in land,
are excluded, the manufacturing trade Scalar Limited proposes to carry on will qualify.
However, it is also necessary for at least 80% of the money raised to be used for the qualifying business activity within
12 months of the relevant date and the remaining 20% to be so used within the following 12 months. Andrew and the
other investors will thus have to ensure that Scalar Limited has not raised more funds than it is able to employ in the
business within the appropriate time periods.
Reliefs available:
Andrew can claim income tax relief at 20% income tax relief on the amount invested up to a maximum of ￡200,000
in any one tax year. The relief is given in the form. of a tax reducing allowance, which can reduce the investor’s income
tax liability to nil, but cannot be used to generate a tax refund. If the investment is made prior to 6 October in the tax
year, then 50% of the amount invested (up to a maximum of ￡25,000) can be treated as having been made in the
previous tax year.
Any capital gains arising on the sale of EIS shares will be fully exempt from capital gains tax provided that income tax
relief was given on the investment when made and has not been withdrawn. If the EIS shares are disposed of at a loss,
capital losses are still allowable, but reduced by the amount of any EIS relief attributable to the shares disposed of.
In addition, gains from the disposal of other assets can be deferred against the base cost of EIS shares acquired within
one year before and three years after their disposal. Such gains will, thus, not normally become chargeable until the EIS
shares themselves are disposed of. Further, for deferral relief to be available, it is not necessary for the investment to
qualify for EIS income tax relief, i.e. deferral is available even where the investor is not a qualifying individual. Thus,
Andrew could still defer the gain arising on the disposal of the residential property lease made in order to raise part of
the funds for his EIS investment, even if no fourth investor were to be found and his shareholding were to exceed 30%
of the issued share capital of Scalar Limited. Does not require the existence of income tax relief in order to be claimed.
Withdrawal of relief:
Any EIS relief claimed by Andrew will be withdrawn (partially or fully) if, within three year of the relevant date:
(1) he disposes of the shares;
(2) he receives value from the company;
(3) he ceases to be a qualifying individual; or
(4) Scalar Limited ceases to be a qualifying company.
With regard to receiving value from the company, the definition excludes dividends which do not exceed a normal rate
of return, but does include the repayment of any loans made to the company before the shares were issued, the provision
of benefits and the purchase of assets from the company at an undervalue. In this regard, Andrew and the other
subscribers should ensure that the ￡50,000 they are to invest in Scalar Limited as loan capital is appropriately timed
and structured relative to the issue of the EIS shares. -
第19题：
2 Clifford and Amanda, currently aged 54 and 45 respectively, were married on 1 February 1998. Clifford is a higher
rate taxpayer who has realised taxable capital gains in 2007/08 in excess of his capital gains tax annual exemption.
Clifford moved into Amanda’s house in London on the day they were married. Clifford’s own house in Oxford, where
he had lived since acquiring it for ￡129,400 on 1 August 1996, has been empty since that date although he and
Amanda have used it when visiting friends. Clifford has been offered ￡284,950 for the Oxford house and has decided
that it is time to sell it. The house has a large garden such that Clifford is also considering an offer for the house and
a part only of the garden. He would then sell the remainder of the garden at a later date as a building plot. His total
sales proceeds will be higher if he sells the property in this way.
Amanda received the following income from quoted investments in 2006/07:
￡
Dividends in respect of quoted trading company shares 1,395
Dividends paid by a Real Estate Investment Trust out of tax exempt property income 485
On 1 May 2006, Amanda was granted a 22 year lease of a commercial investment property. She paid the landlord
a premium of ￡6,900 and also pays rent of ￡2,100 per month. On 1 June 2006 Amanda granted a nine year
sub-lease of the property. She received a premium of ￡14,700 and receives rent of ￡2,100 per month.
On 1 September 2006 Amanda gave quoted shares with a value of ￡2,200 to a registered charity. She paid broker’s
fees of ￡115 in respect of the gift.
Amanda began working for Shearer plc, a quoted company, on 1 June 2006 having had a two year break from her
career. She earns an annual salary of ￡38,600 and was paid a bonus of ￡5,750 in August 2006 for agreeing to
come and work for the company. On 1 August 2006 Amanda was provided with a fully expensed company car,
including the provision of private petrol, which had a list price when new of ￡23,400 and a CO2 emissions rate of
187 grams per kilometre. Amanda is required to pay Shearer plc ￡22 per month in respect of the private use of the
car. In June and July 2006 Amanda used her own car whilst on company business. She drove 720 business miles
during this two month period and was paid 34 pence per mile. Amanda had PAYE of ￡6,785 deducted from her gross
salary in the tax year 2006/07.
After working for Shearer plc for a full year, Amanda becomes entitled to the following additional benefits:
– The opportunity to purchase a large number of shares in Shearer plc on 1 July 2007 for ￡3·30 per share. It is
anticipated that the share price on that day will be at least ￡7·50 per share. The company will make an interestfree
loan to Amanda equal to the cost of the shares to be repaid in two years.
– Exclusive free use of the company sailing boat for one week in August 2007. The sailing boat was purchased by
Shearer plc in January 2005 for use by its senior employees and costs the company ￡1,400 a week in respect
of its crew and other running expenses.
Required:
(a) (i) Calculate Clifford’s capital gains tax liability for the tax year 2007/08 on the assumption that the Oxford
house together with its entire garden is sold on 31 July 2007 for ￡284,950. Comment on the relevance
to your calculations of the size of the garden; (5 marks)
正确答案：
-
第20题：
(ii) The UK value added tax (VAT) implications for Razor Ltd of selling tools to and purchasing tools from
Cutlass Inc; (2 marks)
正确答案：
(ii) Value added tax (VAT)
Goods exported are zero-rated. Razor Ltd must retain appropriate documentary evidence that the export has taken place.
Razor Ltd must account for VAT on the value of the goods purchased from Cutlass Inc at the time the goods are brought
into the UK. The VAT payable should be included as deductible input tax on the company’s VAT return. -
第21题：
(iii) The effect of the restructuring on the group’s ability to recover directly and non-directly attributable input
tax. (6 marks)
You are required to prepare calculations in respect of part (ii) only of this part of this question.
Note: – You should assume that the corporation tax rates and allowances for the financial year 2006 apply
throughout this question.
正确答案：(iii) The effect of the restructuring on the group’s ability to recover its input tax
Prior to the restructuring
Rapier Ltd and Switch Ltd make wholly standard rated supplies and are in a position to recover all of their input tax
other than that which is specifically blocked. Dirk Ltd and Flick Ltd are unable to register for VAT as they do not make
taxable supplies. Accordingly, they cannot recover any of their input tax.
Following the restructuring
Rapier Ltd will be carrying on four separate trades, two of which involve the making of exempt supplies such that it will
be a partially exempt trader. Its recoverable input tax will be calculated as follows.
– Input tax in respect of inputs wholly attributable to taxable supplies is recoverable.
– Input tax in respect of inputs wholly attributable to exempt supplies cannot be recovered (subject to the de minimis
limits below).
– A proportion of the company’s residual input tax, i.e. input tax in respect of inputs which cannot be directly
attributed to particular supplies, is recoverable. The proportion is taxable supplies (VAT exclusive) divided by total
supplies (VAT exclusive). This proportion is rounded up to the nearest whole percentage where total residual input
tax is no more than ￡400,000 per quarter.
The balance of the residual input tax cannot be recovered (subject to the de minimis limits below).
– If the de minimis limits are satisfied, Rapier Ltd will be able to recover all of its input tax (other than that which is
specifically blocked) including that which relates to exempt supplies. The de minimis limits are satisfied where the
irrecoverable input tax:
– is less than or equal to ￡625 per month on average; and
– is less than or equal to 50% of total input tax.
The impact of the restructuring on the group’s ability to recover its input tax will depend on the level of supplies made
by the different businesses and the amounts of input tax involved. The restructuring could result in the group being able
to recover all of its input tax (if the de minimis limits are satisfied). Alternatively the amount of irrecoverable input tax
may be more or less than the amounts which cannot be recovered by Dirk Ltd and Flick Ltd under the existing group
structure.
-
第22题：
(ii) Explain how the inclusion of rental income in Coral’s UK income tax computation could affect the
income tax due on her dividend income. (2 marks)
You are not required to prepare calculations for part (b) of this question.
Note: you should assume that the tax rates and allowances for the tax year 2006/07 and for the financial year to
31 March 2007 will continue to apply for the foreseeable future.
正确答案：
(ii) The effect of taxable rental income on the tax due on Coral’s dividend income
Remitting rental income to the UK may cause some of Coral’s dividend income currently falling within the basic rate
band to fall within the higher rate band. The effect of this would be to increase the tax on the gross dividend income
from 0% (10% less the 10% tax credit) to 221/2% (321/2% less 10%).
Tutorial note
It would be equally acceptable to state that the effective rate of tax on the dividend income would increase from 0%
to 25%. -
第23题：
(b) Given his recent diagnosis, advise Stuart as to which of the two proposed investments (Omikron plc/Omega
plc) would be the more tax efficient alternative. Give reasons for your choice. (3 marks)
正确答案：
(b) Both companies are listed. The only difference will be in the availability of inheritance tax relief – specifically business property
relief (BPR). If Stuart and Rebecca jointly hold in excess of 50% of the share capital of a listed company, BPR will apply at
the rate of 50%. Otherwise, no BPR is available.
Stuart can only buy 1,005,000 (￡422,100/￡0·42) shares in Omikron plc. This represents a shareholding of 2·00%
(1,005,000/50,250,000). As the shares in Omikron plc are listed, a 2% holding will not qualify for BPR.
At the moment, both Stuart and Rebecca own 2,400,000 shares in Omega plc. Their shareholdings are amalgamated for
IHT purposes under the related property rules. With a joint holding of 48%, BPR is not available. A further 200,001 shares
will be required to attain a 50% holding. Assuming Stuart and Rebecca can buy these shares, they must then hold their 50%
interest in the company for the period of at least two years in order to ensure that BPR applies.
On the basis that Stuart is expected to survive for two to three years, he should therefore buy further shares in Omega plc in
order to take advantage of the BPR available.