(iii) The extent to which Amy will be subject to income tax in the UK on her earnings in respect of duties
performed for Cutlass Inc and the travel costs paid for by that company. (5 marks)
Appropriateness of format and presentation of the report and the effectiveness with which its advice is
communicated. (2 marks)
Note:
You should assume that the income tax rates and allowances for the tax year 2006/07 and the corporation tax
rates and allowances for the financial year 2006 apply throughout this questio
第1题:
4 Assume today’s date is 5 February 2006.
Joanne is 37, she was born and until 2005 had lived all her life in Germany. She recently married Fraser, aged 38,
who is a UK resident, but who worked briefly in Germany. They have no children.
The couple moved to the UK to live permanently on 9 October 2005. Joanne was employed by an American company
in Germany, and she continued to work for them in the UK until the end of November 2005. Her earnings from the
American company were £5,000 per month. Joanne has not remitted any of the income she earned in Germany prior
to her arrival in the UK.
Joanne resigned from her job at the end of November 2005. The company did not hold her to the three months notice
stipulated in her contract, but still paid her for that period. In total, Joanne paid £4,200 in UK income tax under PAYE
for the tax tear 2005/06.
Joanne also wishes to sell the shares she holds in a German listed company. The shareholding cost the equivalent of
£3,500 in September 1986, and its current value is £21,500. She intends to sell the shares in March 2006 and to
invest the proceeds from the sale in the UK. Joanne has made no other capital disposals in the year.
Prior to her leaving employment, Joanne investigated the possibility of starting her own business providing a German
translation service for UK companies, and took some advice on the matter. She paid consultancy fees of £5,000
(excluding value added tax (VAT)) and bought a computer for £2,000 (excluding VAT), both on 23 October 2005.
Joanne started trading on 1 December 2005. She made sales of £2,000 in December, and estimates that her sales
will rise by £1,000 every month to a maximum of £7,000 per month. Joanne believes that her monthly expenses of
£400 (excluding VAT) will remain constant. Her year end will be 31 March, and the first accounts will be drawn up
to 31 March 2006.
Although Joanne has registered her business for tax purposes with the Revenue, she has not registered for VAT and
is unsure what is required of her in this respect.
Required:
(a) State, giving reasons, whether Joanne will be treated as resident or non-resident in the UK for the year of
assessment 2005/06, together with the basis on which her income and gains of that year will be subject to
UK taxation. (3 marks)
第2题:
(ii) Calculate her income tax (IT) and national insurance (NIC) payable for the year of assessment 2006/07.
(4 marks)
第3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4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)
第5题:
(b) Draft a report as at today’s date advising Cutlass Inc on its proposed activities. The report should cover the
following issues:
(i) The rate at which the profits of Cutlass Inc will be taxed. This section of the report should explain:
– the company’s residency position and what Ben and Amy would have to do in order for the company
to be regarded as resident in the UK under the double tax treaty;
– the meaning of the term ‘permanent establishment’ and the implications of Cutlass Inc having a
permanent establishment in Sharpenia;
– the rate at which the profits of Cutlass Inc will be taxed on the assumption that it is resident in the
UK under the double tax treaty and either does or does not have a permanent establishment in
Sharpenia. (9 marks)
第6题:
(c) The inheritance tax payable by Adam in respect of the gift from his aunt. (4 marks)
Additional marks will be awarded for the appropriateness of the format and presentation of the memorandum and
the effectiveness with which the information is communicated. (2 marks)
Note: you should assume that the tax rates and allowances for the tax year 2006/07 will continue to apply for the
foreseeable future.
第7题:
(ii) The shares held in Date Inc and the dividend income received from that company. (7 marks)
第8题:
(b) (i) Explain, by reference to Coral’s residence, ordinary residence and domicile position, how the rental
income arising in respect of the property in the country of Kalania will be taxed in the UK in the tax year
2007/08. State the strategy that Coral should adopt in order to minimise the total income tax suffered
on the rental income. (7 marks)
第9题:
(iv) The stamp duty and/or stamp duty land tax payable by the Saturn Ltd group; (2 marks)
Additional marks will be awarded for the appropriateness of the format and presentation of the memorandum
and the effectiveness with which the information is communicated. (2 marks)
第10题:
(c) (i) Explain how Messier Ltd can assist Galileo with the cost of relocating to the UK and/or provide him with
interest-free loan finance for this purpose without increasing his UK income tax liability; (3 marks)
第11题:
3 The Stiletto Partnership consisted of three partners, Clint, Ben and Amy, who shared the profits of the business
equally. On 28 February 2007 the partners sold the business to Razor Ltd, in exchange for shares in Razor Ltd, with
each former partner owning one third of the new company.
The recent, tax adjusted, trading profits of the Stiletto Partnership have been as follows:
£
Year ended 30 June 2006 92,124
1 July 2006 to 28 February 2007 81,795
Clint, who was 65 on 5 October 2006, retired when the business was sold to Razor Ltd. He is now suggesting that
if the sale of the partnership, and his retirement, had been delayed until 30 April 2007, his total tax liability would
have been reduced. Clint’s only other income is gross pension income of £6,100 per year, which he began receiving
in the tax year 2005/06. Clint did not receive any salary or dividends from Razor Ltd. It is estimated that the
partnership’s tax adjusted trading profits for the period from 1 March 2007 to 30 April 2007 would have been
£20,760. Clint has overlap profits of £14,250 brought forward from when the partnership began trading.
Razor Ltd manufactures industrial cutting tools. On 1 July 2007, Razor Ltd will subscribe for the whole of the ordinary
share capital of Cutlass Inc, a company newly incorporated in the country of Sharpenia. It is intended that Cutlass
Inc will purchase partly finished tools from Razor Ltd and customise them in Sharpenia. It is anticipated that Cutlass
Inc’s annual profits chargeable to corporation tax will be approximately £120,000.
Ben and Amy will be the directors of Cutlass Inc, although Ben will not be involved in the company’s business on a
day-to-day basis. Amy intends to spend one or two weeks each month in the country of Sharpenia looking after the
company’s affairs. The remainder of her time will be spent in the UK. Amy has employment contracts with both Razor
Ltd and Cutlass Inc and her duties for Cutlass Inc will be carried out wholly in Sharpenia. Cutlass Inc will pay for
Amy’s flights to and from Sharpenia and for her husband and baby to visit her there twice a year. Amy is currently
UK resident and ordinarily resident.
The system of income tax and corporation tax in the country of Sharpenia is broadly similar to that in the UK although
the rate of corporation tax is 38% regardless of the level of profits. There is a double tax treaty between the UK and
Sharpenia based on the OECD model treaty. The clause in the treaty dealing with company residency states that a
company resident in both countries under domestic law will be regarded under the treaty as being resident only in the
country where it is effectively managed and controlled. Sharpenia is not a member of the European Union.
Required:
(a) (i) Calculate Clint’s taxable trading profits for the tax years 2006/07 and 2007/08 for both of the
alternative retirement dates (28 February 2007 and 30 April 2007). (3 marks)
第12题:
第13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14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15题:
(b) Peter, one of Linden Limited’s non-executive directors, having lived and worked in the UK for most of his adult
life, sold his home near London on 22 March 2006 and, together with his wife (a French citizen), moved to live
in a villa which she owns in the south of France. Peter is now demanding that the tax deducted from his director’s
fees, for the board meetings held on 18 April and 16 May 2006, be refunded, on the grounds that, as he is no
longer resident in the UK, he is no longer liable to UK income tax. All of the company’s board meetings are held
at its offices in Cambridge.
Despite Peter’s assurance that none of the other companies of which he is a director has disputed his change of
tax status, Damian is uncertain whether he should make the refunds requested. However, as Peter is a friend of
the company’s founder, Linden Limited’s managing director is urging him to do so, stating that if the tax does
have to be paid, then Linden Limited could always bear the cost.
Required:
Advise Damian whether Peter is correct in his assertion regarding his tax position and in the case that there
is a UK tax liability the implications of the managing director’s suggestion. You are not required to consider
national insurance (NIC) issues. (4 marks)
第16题:
(b) (i) Calculate Amanda’s income tax payable for the tax year 2006/07; (11 marks)
第17题:
(ii) The UK value added tax (VAT) implications for Razor Ltd of selling tools to and purchasing tools from
Cutlass Inc; (2 marks)
第18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).
第19题:
4 Coral is the owner and managing director of Reef Ltd. She is considering the manner in which she will make her first
pension contributions. In November 2007 she inherited her mother’s house in the country of Kalania.
The following information has been extracted from client files and from telephone conversations with Coral.
Coral:
– 1972 – Born in the country of Kalania. Her father, who died in 2002, was domiciled in Kalania.
– 1999 – Moved to the UK and has lived and worked here since then.
– 2001 – Subscribed for 100% of the ordinary share capital of Reef Ltd.
– Intends to sell Reef Ltd and return to live in the country of Kalania in 2012.
– No income apart from that received from Reef Ltd.
Reef Ltd:
– A UK resident company with annual profits chargeable to corporation tax of approximately £70,000.
– Four employees including Coral.
– Provides scuba diving lessons to members of the public.
Payments from Reef Ltd to Coral in 2007/08:
– Director’s fees of £460 per month.
– Dividends paid of £14,250 in June 2007 and £14,250 in September 2007.
Pension contributions:
– Coral has not so far made any pension contributions in the tax year 2007/08 but wishes to make gross pension
contributions of £9,000.
– The contributions are to be made by Reef Ltd or Coral or a combination of the two in such a way as to minimise
the total after tax cost.
– Any contributions made by Coral will be funded by an additional dividend from Reef Ltd.
House in the country of Kalania:
– Beachfront property with potential rental income of £550 per month after deduction of allowable expenditure.
– Coral will use it for holidays for two months each year.
The tax system in the country of Kalania:
– No capital gains tax or inheritance tax.
– Income tax at 8% on income arising in the country of Kalania.
– No double tax treaty with the UK.
Required:
(a) With the objective of minimising the total after tax cost, advise Coral as to whether the gross pension
contributions of £9,000 should be made:
– wholly by Reef Ltd; or
– by Coral to the extent that they are tax allowable with the balance made by Reef Ltd.
Your answer should include supporting calculations where necessary. (9 marks)
第20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21题:
3 Spica, one of the director shareholders of Acrux Ltd, has been in dispute with the other shareholders over plans to
expand the company’s activities overseas. In order to resolve the position it has been agreed that Spica will sell her
shares back to the company. Once the purchase of her shares has taken place, the company intends to establish a
number of branches overseas and acquire a shareholding in a number of companies that are resident and trade in
overseas countries.
The following information has been obtained from client files and meetings with the parties involved.
Acrux Ltd:
– An unquoted UK resident company.
– Share capital consists of 50,000 ordinary shares issued at £1·90 per share in July 2000.
– None of the other shareholders has any connection with Spica.
The purchase of own shares:
– The company will purchase all of Spica’s shares for £8 per share.
– The transaction will take place by the end of 2008.
Spica:
– Purchased 8,000 shares in Acrux Ltd for £2 per share on 30 September 2003.
– Has no income in the tax year 2008/09.
– Has chargeable capital gains in the tax year 2008/09 of £3,800.
– Has houses in the UK and the country of Solaris and divides her time between them.
Investment in non-UK resident companies:
– Acrux Ltd will acquire between 15% and 20% of each of the non-UK resident companies.
– The companies will not be controlled foreign companies as the rates of tax in the overseas countries will be
between 23% and 42%.
– There may or may not be a double tax treaty between the UK and the overseas countries in which the companies
are resident. Where there is a treaty, it will be based on the OECD model treaty.
– None of the countries concerned levy withholding tax on dividends paid to UK companies.
– The directors of Acrux Ltd are concerned that the rate of tax suffered on the profits of the overseas companies
will be very high as they will be taxed in both the overseas country and in the UK.
Required:
(a) (i) Prepare detailed calculations to determine the most beneficial tax treatment of the payment Spica will
receive for her shares; (7 marks)
第22题:
(ii) State, with reasons, whether Messier Ltd can provide Galileo with accommodation in the UK without
giving rise to a UK income tax liability. (2 marks)
第23题: