(c) Without changing the advice you have given in (b), or varying the terms of Luke’s will, explain how Mabelcould further reduce her eventual inheritance tax liability and quantify the tax saving that could be made.(3 marks)The increase in the retail pri
题目
(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.
相似考题
参考答案和解析
(c) Further advice
Mabel should consider delaying one of the gifts until after 1 May 2007 such that it is made more than seven years after the
gift to the discretionary trust. Both PETs would then be covered by the nil rate band resulting in a saving of inheritance tax
of ￡6,720 (from (b)).
Mabel should ensure that she uses her inheritance tax annual exemption of ￡3,000 every year by, say, making gifts of ￡1,500
each year to both Bruce and Padma. The effect of this will be to save inheritance tax of ￡1,200 (￡3,000 x 40%) every year.
更多“(c) Without changing the advice you have given in (b), or varying the terms of Luke’s will, explain how Mabelcould further reduce her eventual inheritance tax liability and quantify the tax saving that could be made.(3 marks)The increase in the retail pri”相关问题
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第1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)
正确答案：
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2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
正确答案：
(c) Reduction of income tax liability by investing in unquoted shares
The two forms of investment
Income tax relief is available for investments in venture capital trusts (VCTs) and enterprise investment scheme (EIS) shares.
A VCT is a quoted company that invests in shares in a number of unquoted trading companies. EIS shares are shares in
qualifying unquoted trading companies.
Recommendation
The most suitable investment for Arthur and Cindy is a VCT for the following reasons.
– An investment in a VCT is likely to be less risky than investing directly in EIS companies as the risk will be spread over
a greater number of companies.
– The tax deduction is 40% of the amount invested as opposed to 20% for EIS shares.
– Dividends from a VCT are not taxable whereas dividends on EIS shares are taxed in the normal way. -
第3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：
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第4题：
(b) Calculate the inheritance tax (IHT) liability arising as a result of Christopher’s death. (11 marks)
正确答案：
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第5题：
(ii) Calculate Paul’s tax liability if he exercises the share options in Memphis plc and subsequently sells the
shares in Memphis plc immediately, as proposed, and show how he may reduce this tax liability.
(4 marks)
正确答案：
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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：
(c) (i) Explain the inheritance tax (IHT) implications and benefits of Alvaro Pelorus varying the terms of his
father’s will such that part of Ray Pelorus’s estate is left to Vito and Sophie. State the date by which a
deed of variation would need to be made in order for it to be valid; (3 marks)
正确答案：
(c) (i) Variation of Ray’s will
The variation by Alvaro of Ray’s will, such that assets are left to Vito and Sophie, will not be regarded as a gift by Alvaro.
Instead, provided the deed states that it is intended to be effective for IHT purposes, it will be as if Ray had left the assets
to the children in his will.
This strategy, known as skipping a generation, will have no effect on the IHT due on Ray’s death but will reduce the
assets owned by Alvaro and thus his potential UK IHT liability. A deed of variation is more tax efficient than Alvaro
making gifts to the children as such gifts would be PETs and IHT may be due if Alvaro were to die within seven years.
The deed of variation must be entered into by 31 January 2009, i.e. within two years of the date of Ray’s death. -
第8题：
(ii) Any increase or decrease in the group’s budgeted corporation tax liability for the year ending 30 June
2008 due to the restructuring on the assumption that trading losses will be used as efficiently as
possible. (8 marks)
正确答案：(ii) The budgeted corporation tax liability for the year ending 30 June 2008
Following the proposed restructuring, Rapier Ltd will be carrying on four separate trades. The current year loss arising
in the Dirk trade can be offset against its total profits. Its three subsidiaries will be dormant and will not be associates
for the purpose of determining the rate of corporation tax.
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第9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.
正确答案：
(c) Inheritance tax payable by Adam
The gift by AS’s aunt was a potentially exempt transfer. No tax will be due if she lives until 1 June 2014 (seven years after
the date of the gift).
The maximum possible liability, on the assumption that there are no annual exemptions or nil band available, is ￡35,216
(￡88,040 x 40%). This will only arise if AS’s aunt dies before 1 June 2010.
The maximum liability will be reduced by taper relief of 20% for every full year after 31 May 2010 for which AS’s aunt lives.
The liability will also be reduced if the chargeable transfers made by the aunt in the seven years prior to 1 June 2007 are
less than ￡285,000 or if the annual exemption for 2006/07 and/or 2007/08 is/are available. -
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.
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11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)
正确答案：
(c) (i) Relocation costs
Direct assistance
Messier Ltd can bear the cost of certain qualifying relocation costs of Galileo up to a maximum of ￡8,000 without
increasing his UK income tax liability. Qualifying costs include the legal, professional and other fees in relation to the
purchase of a house, the costs of travelling to the UK and the cost of transporting his belongings. The costs must be
incurred before the end of the tax year following the year of the relocation, i.e. by 5 April 2010.
Assistance in the form. of a loan
Messier Ltd can provide Galileo with an interest-free loan of up to ￡5,000 without giving rise to any UK income tax. -
第12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)
正确答案：(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.
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第13题：
(b) Mabel has two objectives when making the gifts to Bruce and Padma:
(1) To pay no tax on any gift in her lifetime; and
(2) To reduce the eventual liability to inheritance tax on her death.
Advise Mabel which item to gift to Bruce and to Padma in order to satisfy her objectives. Give reasons for
your advice.
Your advice should include a computation of the inheritance tax saved as a result of the two gifts, on the
assumption that Mabel dies on 30 June 2011. (10 marks)
正确答案：
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第14题：
(b) Compute Gloria’s total income tax and national insurance liability for 2006/07. (7 marks)
正确答案：
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第15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：
(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18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19题：
(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
正确答案：
(iii) Amy’s UK income tax position
Amy will remain UK resident and ordinarily resident as she is not leaving the UK permanently or for a complete tax year
under a full time contract of employment. Accordingly, she will continue to be subject to UK tax on her worldwide income
including her earnings in respect of the duties she performs for Cutlass Inc. The earnings from these duties will also be
taxable in Sharpenia as the income arises in that country.
The double tax treaty between the UK and Sharpenia will either exempt the employment income in one of the two
countries or give double tax relief for the tax paid in Sharpenia. The double tax relief will be the lower of the UK tax and
the Sharpenian tax on the income from Cutlass Inc.
Amy will not be subject to UK income tax on the expenses borne by Cutlass Inc in respect of her flights to and from
Sharpenia provided her journeys are wholly and exclusively for the purposes of performing her duties in Sharpenia.
The amounts paid by Cutlass Inc in respect of Amy’s family travelling to Sharpenia will be subject to UK income tax as
Amy will not be absent from the UK for a continuous period of at least 60 days. -
第20题：
(c) Calculate and explain the amount of income tax relief that Gerard will obtain in respect of the pension
contributions he proposes to make in the tax year 2007/08 and contrast this with how his position could be
improved by delaying some of the contributions that he could have made in 2007/08 until 2008/09. You
should include relevant supporting calculations and quantify the additional tax savings arising as a result of
your advice.
You should ignore the proposed changes to the bonus scheme for this part of this question and assume that
Gerard’s income will not change in 2008/09. (12 marks)
正确答案：
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第21题：
(b) Explain why making sales of Sabals in North America will have no effect on Nikau Ltd’s ability to recover its
input tax. (3 marks)
Notes: – you should assume that the corporation tax rates and allowances for the financial year to 31 March 2007
will continue to apply for the foreseeable future.
– you should ignore indexation allowance.
正确答案：
(b) Recoverability of input tax
Sales by Nikau Ltd of its existing products are subject to UK VAT at 17·5% because it is selling to domestic customers who
will not be registered for VAT. Accordingly, at present, Nikau Ltd can recover all of its input tax.
Sales to customers in North America will be zero rated because the goods are being exported from the EU. Zero rated supplies
are classified as taxable for the purposes of VAT and therefore Nikau Ltd will continue to be able to recover all of its input tax. -
第22题：
(ii) Explain why Galileo is able to pay the inheritance tax due in instalments, state when the instalments are
due and identify any further issues relevant to Galileo relating to the payments. (3 marks)
正确答案：
(ii) Payment by instalments
The inheritance tax can be paid by instalments because Messier Ltd is an unquoted company controlled by Kepler at
the time of the gift and is still unquoted at the time of his death.
The tax is due in ten equal annual instalments starting on 30 November 2008.
Interest will be charged on any instalments paid late; otherwise the instalments will be interest free because Messier is
a trading company that does not deal in property or financial assets.
All of the outstanding inheritance tax will become payable if Galileo sells the shares in Messier Ltd.
Tutorial note
Candidates were also given credit for stating that payment by instalments is available because the shares represent at
least 10% of the company’s share capital and are valued at ￡20,000 or more. -
第23题：
(c) (i) Calculate Benny’s capital gains tax liability for 2006/07. (6 marks)
正确答案：