(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.
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 when the inheritance tax (IHT) calculated in (i) would be payable and by whom. (2 marks)
第3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4题:
(ii) Compute the annual income tax saving from your recommendation in (i) above as compared with the
situation where Cindy retains both the property and the shares. Identify any other tax implications
arising from your recommendation. Your answer should consider all relevant taxes. (3 marks)
第5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.
第6题:
(b) (i) State the condition that would need to be satisfied for the exercise of Paul’s share options in Memphis
plc to be exempt from income tax and the tax implications if this condition is not satisfied.
(2 marks)
第7题:
(iii) State the value added tax (VAT) and stamp duty (SD) issues arising as a result of inserting Bold plc as
a holding company and identify any planning actions that can be taken to defer or minimise these tax
costs. (4 marks)
You should assume that the corporation tax rates for the financial year 2005 and the income tax rates
and allowances for the tax year 2005/06 apply throughout this question.
第8题:
(c) Briefly outline the corporation tax (CT) issues that Tay Limited should consider when deciding whether to
acquire the shares or the assets of Tagus LDA. You are not required to discuss issues relating to transfer
pricing. (7 marks)
第9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)
第10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.
第11题:
听力原文:The tax return does not show accrued income.
(8)
A.The tax return is not shown in the income.
B.The income is not accurate in taxation.
C.The tax should be returned according to the income.
D.The tax return is not in accordance with the income that should be taxed.
第12题:
第13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14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15题:
(c) Without changing the advice you have given in (b), or varying the terms of Luke’s will, explain how Mabel
could further reduce her eventual inheritance tax liability and quantify the tax saving that could be made.
(3 marks)
The increase in the retail prices index from April 1984 to April 1998 is 84%.
You should assume that the rates and allowances for the tax year 2005/06 will continue to apply for the
foreseeable future.
第16题:
(c) Outline the ways in which Arthur and Cindy can reduce their income tax liability by investing in unquoted
shares and recommend, with reasons, which form. of investment best suits their circumstances. You are not
required to discuss the qualifying conditions applicable to the investment vehicle recommended. (5 marks)
You should assume that the income tax rates and allowances for the tax year 2005/06 apply throughout this
question
第17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)
第18题:
(c) For commercial reasons, Damian believes that it would be sensible to place a new holding company, Bold plc,
over the existing company, Linden Limited. Bold plc would also be unquoted and would acquire the existing
Linden Limited shares in exchange for the issue of its own shares.
If the new structure is implemented, Bold plc will provide management services to Linden Limited, but the
amount that will be charged for these services is yet to be determined.
Required:
(i) State the capital gains tax (CGT) issues that Damian should be aware of before disposing of his shares
in Linden Limited to Bold plc. Your answer should include details of any conditions that will need to be
satisfied if an immediate charge to tax is to be avoided. (4 marks)
第19题:
(b) For this part, assume today’s date is 1 May 2010.
Bill and Ben decided not to sell their company, and instead expanded the business themselves. Ben, however,
is now pursuing other interests, and is no longer involved with the day to day activities of Flower Limited. Bill
believes that the company would be better off without Ben as a voting shareholder, and wishes to buy Ben’s
shares. However, Bill does not have sufficient funds to buy the shares himself, and so is wondering if the
company could acquire the shares instead.
The proposed price for Ben’s shares would be £500,000. Both Bill and Ben pay income tax at the higher rate.
Required:
Write a letter to Ben:
(1) stating the income tax (IT) and/or capital gains tax (CGT) implications for Ben if Flower Limited were to
repurchase his 50% holding of ordinary shares, immediately in May 2010; and
(2) advising him of any available planning options that might improve this tax position. Clearly explain any
conditions which must be satisfied and quantify the tax savings which may result.
(13 marks)
Assume that the corporation tax rates for the financial year 2005 and the income tax rates and allowances
for the tax year 2005/06 apply throughout this question.
(b) [Ben’s address] [Firm’s address]
Dear Ben [Date]
A company purchase of own shares can be subject to capital gains treatment if certain conditions are satisfied. However, one
of these conditions is that the shares in question must have been held for a minimum period of five years. As at 1 May 2010,
your shares in Flower Limited have only been held for four years and ten months. As a result, the capital gains treatment will
not apply.
In the absence of capital gains treatment, the position on a company repurchase of its own shares is that the payment will
be treated as an income distribution (i.e. a dividend) in the hands of the recipient. The distribution element is calculated as
the proceeds received for the shares less the price paid for them. On the basis that the purchase price is £500,000, then the
element of distribution will be £499,500 (500,000 – 500). This would be taxed as follows:
第20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)
第21题:
(d) Evaluate the effect on Gerard of the changes to be made by Fizz plc to its performance related bonus scheme.
You should ignore the effect of any pension contributions to be made by Gerard in the future, consider both
the value and timing of amounts received by Gerard and include relevant supporting calculations.
(5 marks)
Note: – You should assume that the income tax rates and allowances for the tax year 2006/07 apply throughout
this question.
第22题:
(c) In November 2006 Seymour announced the recall and discontinuation of a range of petcare products. The
product recall was prompted by the high level of customer returns due to claims of poor quality. For the year to
30 September 2006, the product range represented $8·9 million of consolidated revenue (2005 – $9·6 million)
and $1·3 million loss before tax (2005 – $0·4 million profit before tax). The results of the ‘petcare’ operations
are disclosed separately on the face of the income statement. (6 marks)
Required:
For each of the above issues:
(i) comment on the matters that you should consider; and
(ii) state the audit evidence that you should expect to find,
in undertaking your review of the audit working papers and financial statements of Seymour Co for the year ended
30 September 2006.
NOTE: The mark allocation is shown against each of the three issues.
■ The discontinuation of the product line after the balance sheet date provides additional evidence that, as at the
balance sheet date, it was of poor quality. Therefore, as at the balance sheet date:
– an allowance (‘provision’) may be required for credit notes for returns of products after the year end that were
sold before the year end;
– goods returned to inventory should be written down to net realisable value (may be nil);
– any plant and equipment used exclusively in the production of the petcare range of products should be tested
for impairment;
– any material contingent liabilities arising from legal claims should be disclosed.
(ii) Audit evidence
■ A copy of Seymour’s announcement (external ‘press release’ and any internal memorandum).
■ Credit notes raised/refunds paid after the year end for faulty products returned.
■ Condition of products returned as inspected during physical attendance of inventory count.
■ Correspondence from customers claiming reimbursement/compensation for poor quality.
■ Direct confirmation from legal adviser (solicitor) regarding any claims for customers including estimates of possible
payouts.
第23题:
James died on 22 January 2015. He had made the following gifts during his lifetime:
(1) On 9 October 2007, a cash gift of £35,000 to a trust. No lifetime inheritance tax was payable in respect of this gift.
(2) On 14 May 2013, a cash gift of £420,000 to his daughter.
(3) On 2 August 2013, a gift of a property valued at £260,000 to a trust. No lifetime inheritance tax was payable in respect of this gift because it was covered by the nil rate band. By the time of James’ death on 22 January 2015, the property had increased in value to £310,000.
On 22 January 2015, James’ estate was valued at £870,000. Under the terms of his will, James left his entire estate to his children.
The nil rate band of James’ wife was fully utilised when she died ten years ago.
The nil rate band for the tax year 2007–08 is £300,000, and for the tax year 2013–14 it is £325,000.
Required:
(a) Calculate the inheritance tax which will be payable as a result of James’ death, and state who will be responsible for paying the tax. (6 marks)
(b) Explain why it might have been beneficial for inheritance tax purposes if James had left a portion of his estate to his grandchildren rather than to his children. (2 marks)
(c) Explain why it might be advantageous for inheritance tax purposes for a person to make lifetime gifts even when such gifts are made within seven years of death.
Notes:
1. Your answer should include a calculation of James’ inheritance tax saving from making the gift of property to the trust on 2 August 2013 rather than retaining the property until his death.
2. You are not expected to consider lifetime exemptions in this part of the question. (2 marks)
(a) James – Inheritance tax arising on death
Lifetime transfers within seven years of death
The personal representatives of James’ estate will be responsible for paying the inheritance tax of £348,000.
Working – Available nil rate band
(b) Skipping a generation avoids a further charge to inheritance tax when the children die. Gifts will then only be taxed once before being inherited by the grandchildren, rather than twice.
(c) (1) Even if the donor does not survive for seven years, taper relief will reduce the amount of IHT payable after three years.
(2) The value of potentially exempt transfers and chargeable lifetime transfers are fixed at the time they are made.
(3) James therefore saved inheritance tax of £20,000 ((310,000 – 260,000) at 40%) by making the lifetime gift of property.