题目内容
Bex has recently left employment and entered into a business partnership with Amy. Bex requires advice in respect of a loan to the partnership, the calculation of her share of profits and the tax treatment of her redundancy payment.
Bex:
– Is resident and domiciled in the UK.
– Received an annual salary of ￡120,000 from her former employer, Cape Ltd.
– Was made redundant by Cape Ltd on 30 September 2015.
– Joined Amy, a sole trader, to form. a partnership on 1 January 2016.
– Has no other source of income.
Amy and Bex partnership:
– Will prepare its first set of accounts for the 16-month period to 30 April 2017.
– Is expected to make a tax-adjusted profit of ￡255,000 (before deducting interest and capital allowances) for the period ending 30 April 2017.
– The tax written down value on its main pool at 1 January 2016 is ￡nil.
– Except for the computer referred to below, no further assets will be purchased by either Amy or Bex for use in the partnership in the period ending 30 April 2017.
Profit sharing arrangements:
– The partnership’s profit sharing agreement is as follows:
Bex – loans:
– In addition to her capital contribution, Bex will make a ￡20,000 loan to the partnership on 1 August 2016. The partnership will use this money wholly for business purposes.
– This loan will be financed by a ￡25,000 personal loan from Bex’s bank, taken out on the same date.
– The remaining ￡5,000 of the bank loan will be used to purchase a computer for use in the partnership. Bex will have 20% private use of this computer.
– Both the loan from Bex to the partnership and the personal bank loan to Bex will carry interest at the rate of 5% per annum.
Bex – redundancy package from Cape Ltd:
– The package comprised a ￡22,000 statutory redundancy payment and an additional ex-gratia payment of ￡48,000.
– Bex also received three months’ salary in lieu of notice, as specified in her contract of employment.
Required:
(a) (i) Explain, with the aid of calculations, the tax deductions which will be available in respect of the loan interest payable on both the loan from Bex to the partnership and the personal bank loan to Bex. (7 marks)
(ii) In respect of the period ending 30 April 2017, show the allocation between the partners of the taxable trading profit of the partnership. (4 marks)
(iii) Calculate Bex’s taxable trading income in respect of her share of the partnership profits for all relevant tax years. Note: Your answer to (a)(iii) should clearly state the tax years and basis periods involved. (3 marks)
(b) Explain the income tax implications for Bex of the receipt of the redundancy package from Cape Ltd and calculate her total income tax liability for the tax year 2015/16. (6 marks)
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Section B – TWO questions ONLY to be attempted
Your client, Eric, requires advice on the capital gains tax implications arising from the receipt of insurance proceeds and the disposal of some shares, and the inheritance tax reliefs available in respect of assets in his estate at death. His son Zak requires advice regarding the application of the personal service company (IR35) legislation.
Eric:
– Is UK resident and domiciled.
– Is a higher rate taxpayer.
– Is in ill health and is expected to die within the next few months.
Capital transactions in the tax year 2014/15:
– Eric made no disposals for capital gains tax purposes in the tax year 2014/15 other than those detailed below.
– Eric received insurance proceeds of ￡10,000 following damage to a valuable painting.
– Eric sold half of his shareholding in Malaga plc for ￡11·50 per share.
Damaged painting:
– Eric purchased the painting for ￡46,000 in July 2012.
– The painting was damaged in October 2014 such that immediately afterwards its value fell to ￡38,000.
– The insurance proceeds of ￡10,000 were received by Eric on 1 December 2014.
– Eric has not had the painting repaired.
Malaga plc shares:
– Malaga plc is a quoted trading company with 200,000 issued shares.
– 80% of Malaga plc’s chargeable assets have always been chargeable business assets.
– Eric was given 12,000 shares in Malaga plc by his sister on 1 April 2010, when they were valued at ￡126,000.
– Eric’s sister had purchased the shares for ￡96,000 on 1 March 2009.
– Gift relief was claimed in respect of the gift of the shares to Eric on 1 April 2010.
– Eric paid the inheritance tax arising in respect of this gift following his sister’s death on 1 September 2011.
– Eric has never worked for Malaga plc.
– Eric sold 6,000 shares in Malaga plc on 1 March 2015.
Assets owned by Eric and a previous lifetime gift:
– Eric owns farmland in the UK, which has been leased to a tenant farmer for the last ten years.
– The farmland has a market value of ￡420,000 and an agricultural value of ￡340,000.
– Eric’s other assets, excluding the remaining Malaga plc shares, are valued at ￡408,000.
– Eric has made only one previous lifetime gift, of ￡60,000 cash to his son Zak on 1 July 2009.
Zak:
– Is the sole shareholder, director and employee of Yoyo Ltd, a company which provides consultancy services.
– In the year ended 31 March 2016, Yoyo Ltd’s gross fee income from relevant engagements performed by Zak will be ￡110,000.
– In the tax year 2015/16, Zak will draw a salary of ￡24,000 and dividends of ￡50,000 from Yoyo Ltd.
– Neither Yoyo Ltd nor Zak has any other source of income.
Required:
(a) Calculate Eric’s total after-tax proceeds in respect of the two capital gains tax disposals in the tax year 2014/15. (6 marks)
(b) (i) On the assumption that Eric dies on 31 March 2016, advise on the availability and effect (if any), of agricultural property relief, business property relief and quick succession relief in respect of the farmland and the retained shares in Malaga plc.
Note: You are not required to prepare calculations for this part of the question. (6 marks)
(ii) Explain, with the aid of calculations, the impact on the inheritance tax liability arising on Eric’s death if Eric does not die until 1 August 2016. (3 marks)
(c) Calculate Zak’s taxable income for the tax year 2015/16 if the personal service company (IR35) legislation were to apply to the fee income received by Yoyo Ltd. (5 marks)
Your firm has been asked to provide advice to Granada Ltd, and one of its shareholders, Maria. Maria wants advice on the tax consequences of selling some of her shares back to Granada Ltd. Granada Ltd wants advice on the corporation tax and value added tax (VAT) implications of the recent acquisition of an unincorporated business.
Maria:
– Is resident and domiciled in the UK.
– Is a higher rate taxpayer and will remain so in the future.
– Has already realised chargeable gains of ￡15,000 in the tax year 2015/16.
Shares in Granada Ltd:
– Maria subscribed for 10,000 ￡1 ordinary shares in Granada Ltd at par in June 2006.
– Maria is one of four equal shareholders and directors of Granada Ltd.
– Maria intends to sell either 2,700 or 3,200 shares back to the company on 31 March 2016 at their current market value of ￡12·80 per share.
– All of the conditions for capital treatment are satisfied, except for, potentially, the condition relating to the reduction in the level of shareholding.
Granada Ltd:
– Is a UK resident trading company which manufactures knitwear.
– Prepares accounts to 31 December each year.
– Is registered for VAT.
– Acquired the trade and assets of an unincorporated business, Starling Partners, on 1 January 2016.
Starling Partners:
– Had been trading as a partnership for many years as a wholesaler of handbags within the UK.
– Starling Partners’ main assets comprise a freehold commercial building and its ‘Starling’ brand, which were valued on acquisition by Granada Ltd at ￡105,000 and ￡40,000 respectively.
– Is registered for VAT.
– The transfer of its trade and assets to Granada Ltd qualified as a transfer of a going concern (TOGC) for VAT purposes.
– The business is forecast to make a trading loss of ￡130,000 in the year ended 31 December 2016.
Granada Ltd – results and proposed expansion:
– The knitwear business is expected to continue making a taxable trading profit of around ￡100,000 each year.
– Granada Ltd has no non-trading income but realised a chargeable gain of ￡10,000 on 1 March 2016.
– Granada Ltd is considering expanding the wholesale handbag trade acquired from Starling Partners into the export market from 1 January 2017.
– Granada Ltd anticipates that this expansion will result in the wholesale handbag trade returning a profit of ￡15,000 in the year ended 31 December 2017.
Required:
(a) (i) Explain, with the aid of calculations, why the capital treatment WILL NOT apply if Maria sells 2,700 of her shares back to Granada Ltd, but WILL apply if, alternatively, she sells back 3,200 shares. (4 marks)
(ii) Calculate Maria’s after-tax proceeds per share if she sells:
(1) 2,700 shares back to Granada Ltd; and alternatively
(2) 3,200 shares back to Granada Ltd. (4 marks)
(b) (i) Describe the corporation tax treatment of the acquisition of the ‘Starling’ brand by Granada Ltd, if no charge for amortisation was required in its statement of profit or loss. (3 marks)
(ii) Discuss how Granada Ltd could obtain relief for the trading loss expected to be incurred by the trade acquired from Starling Partners, if it does not wish to carry any of the loss back. (5 marks)
(c) Explain the value added tax (VAT) implications for Granada Ltd in respect of the acquisition of the business of Starling Partners, and the additional information needed in relation to the building to fully clarify the VAT position. (4 marks)
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