For this part, assume today’s date is 15 August 2005.5 (a) Donald is aged 22, single, and about to finish his university education. He has plans to start up a business sellingcomputer games, and intends to start trading on 1 April 2006, making up accounts

(b) Donald actually decided to operate as a sole trader. The first year’s results of his business were not as he had

hoped, and he made a trading loss of ￡8,000 in the year to 31 March 2007. However, trading is now improving,

and Donald has sufficient orders to ensure that the business will make profits of at least ￡30,000 in the year to

31 March 2008.

In order to raise funds to support his business over the last 15 months, Donald has sold a painting which was

given to him on the death of his grandmother in January 1998. The probate value of the painting was ￡3,200,

and Donald sold it for ￡8,084 (after deduction of 6% commission costs) in November 2006.

He also sold other assets in the year of assessment 2006/07, realising further chargeable gains of ￡8,775 (after

indexation of ￡249 and taper relief of ￡975).

Required:

(i) Calculate the chargeable gain on the disposal of the painting in November 2006. (4 marks)

4 Assume today’s date is 15 May 2005.

In March 1999, Bob was made redundant from his job as a furniture salesman. He decided to travel round the world,

and did so, returning to the UK in May 2001. Bob then decided to set up his own business selling furniture. He

started trading on 1 October 2001. After some initial success, the business made losses as Bob tried to win more

customers. However, he was eventually successful, and the business subsequently made profits.

The results for Bob’s business were as follows:

Period Schedule D Case I

Trading Profits/(losses)

￡

1 October 2001 – 30 April 2002 13,500

1 May 2002 – 30 April 2003 (18,000)

1 May 2003 – 30 April 2004 28,000

Bob required funds to help start his business, so he raised money in three ways:

(1) Bob is a keen cricket fan, and in the 1990s, he collected many books on cricket players. To raise money, Bob

started selling books from his collection. These had risen considerably in value and sold for between ￡150 and

￡300 per book. None of the books forms part of a set. Bob created an internet website to advertise the books.

Bob has not declared this income, as he believes that the proceeds from selling the books are non-taxable.

(2) He disposed of two paintings and an antique silver coffee set at auction on 1 December 2004, realising

chargeable gains totalling ￡23,720.

(3) Bob took a part time job in a furniture store on 1 January 2003. His annual salary has remained at ￡12,600

per year since he started this employment.

Bob has 5,000 shares in Willis Ltd, an unquoted trading company based in the UK. He subscribed for these shares

in August 2000, paying ￡3 per share. On 1 December 2004, Bob received a letter informing him that the company

had gone into receivership. As a result, his shares were almost worthless. The receivers dealing with the company

estimated that on the liquidation of the company, he would receive no more than 10p per share for his shareholding.

He has not yet received any money.

Required:

(a) Write a letter to Bob advising him on whether or not he is correct in believing that his book sales are nontaxable.

Your advice should include reference to the badges of trade and their application to this case.

(9 marks)

(ii) Write a letter to Donald advising him on the most tax efficient manner in which he can relieve the loss

incurred in the year to 31 March 2007. Your letter should briefly outline the types of loss relief available

and explain their relative merits in Donald’s situation. Assume that Donald will have no source of income

other than the business in the year of assessment 2006/07 and that any income he earned on a parttime

basis while at university was always less than his annual personal allowance. (9 marks)

Assume that the corporation tax rates and allowances for the financial year 2004 and the income tax rates

and allowances for 2004/05 apply throughout this question.

Relevant retail price index figures are:

January 1998 159·5

April 1998 162·6

A: What's the date today? B: It's April 1st.()

_____________. American and Danish buyers in particular are showing interest. “Pricing,” he explains, “depends on the intricacy of the design.”His most recent request was for a curly-coated dog. Whatever the occasion, Graham can create a gift with a difference.

［A］Graham has become increasingly busy, supplying flat-packed weathervanes to clients worldwide.

［B］Graham decided to concentrate his efforts on a weathervane business. He had served an apprenticeship as a precision engineer and had worked in that trade for 15 years when he and his wife, Liz, agreed to swap roles—she went out to work as an architectural assistant and he stayed at home to look after the children and build up the business.

［C］Last month, a local school was opened with his galleon ship weathervane hoisted above it.

［D］“For centuries, weathervanes have kept communities in touch with the elements, signaling those shifts in wind direction that bring about changes in the weather,” he explains.

［E］Graham has no plans for expansion, as he wants to keep the business as a rural craft.

［F］Graham has now perfected over 100 original designs. He works to very fine detail, always seeking approval for the design of the silhouette from the customer before proceeding with the hand-cutting.

6 Alasdair, aged 42, is single. He is considering investing in property, as he has heard that this represents a good

investment. In order to raise the funds to buy the property, he wants to extract cash from his personal company, Beezer

Limited, whose year end is 31 December.

Beezer Limited was formed on 1 May 1998 with ￡1,000 of capital issued as 1,000 ￡1 ordinary shares, and traded

until 1 January 2005 when Alasdair sold the trade and related assets. The company’s only asset is cash of

￡120,000. Alasdair wants to extract this cash from the company with the minimum amount of tax payable. He is

considering either, paying himself a dividend of ￡120,000, on 31 March 2006, after which the company would have

no assets and be wound up or, leaving the cash in the company and then liquidating the company. Costs of liquidation

of ￡5,000 would then be incurred.

Since Beezer Limited ceased trading, Alasdair has been taken on as a partner at a marketing firm, Gallus & Co. He

estimates his profit share for the year of assessment 2005/06 will be ￡30,000. He has not made any capital disposals

in the current tax year.

Alasdair wishes to reinvest the cash extracted from Beezer Limited in property but is not sure whether he should invest

directly in residential or commercial property, or do so via some form. of collective investment. He is aware that Gallus

& Co are looking to rent a new warehouse which could be bought for ￡200,000. Alasdair thinks that he may be able

to buy the warehouse himself and lease it to his firm, but only if he can borrow the additional money to buy the

property.

Alasdair has a 25% shareholding in another company, Glaikit Limited, whose year end is 31 March. The remaining

shares in this company are held by his friend, Gill. Alasdair is considering borrowing ￡15,000 from Glaikit Limited

on 1 January 2006. He does not intend to pay any interest on the loan, which is likely to be written off some time

in 2007. Alasdair does not have any connection with Glaikit Limited other than his shareholding.

Required:

(a) Advise Alasdair whether or not a dividend payment will result in a higher after-tax cash sum than the

liquidation of Beezer Limited. Assume that either the dividend would be paid on 31 March 2006 or the

liquidation would take place on 31 March 2006. (9 marks)

Assume that Beezer Limited has always paid corporation tax at or above the small companies rate of 19%

and that the tax rates and allowances for 2004/05 apply throughout this part.

6 Assume today’s date is 16 April 2005.

Henry, aged 48, is the managing director of Happy Home Ltd, an unquoted UK company specialising in interior

design. He is wealthy in his own right and is married to Helen, who is 45 years old. They have two children – Stephen,

who is 19, and Sally who is 17.

As part of his salary, Henry was given 3,000 shares in Happy Home Ltd with an option to acquire a further 10,000

shares. The options were granted on 15 July 2003, shortly after the company started trading, and were not part of

an approved share option scheme. The free shares were given to Henry on the same day.

The exercise price of the share options was set at the then market value of ￡1·00 per share. The options are not

capable of being exercised after 10 years from the date of grant. The company has been successful, and the current

value of the shares is now ￡14·00 per share. Another shareholder has offered to buy the shares at their market value,

so Henry exercised his share options on 14 April 2005 and will sell the shares next week, on 20 April 2005.

With the company growing in size, Henry wishes to recruit high quality staff, but the company lacks the funds to pay

them in cash. Henry believes that giving new employees the chance to buy shares in the company would help recruit

staff, as they could share in the growth in value of Happy Home Ltd. Henry has heard that there is a particular share

scheme that is suitable for small, fast growing companies. He would like to obtain further information on how such

a scheme would work.

Henry has accumulated substantial assets over the years. The family house is owned jointly with Helen, and is worth

￡650,000. Henry has a ￡250,000 mortgage on the house. In addition, Henry has liquid assets worth ￡340,000

and Helen has shares in quoted companies currently worth ￡125,000. Henry has no forms of insurance, and believes

he should make sure that his wealth and family are protected. He is keen to find out what options he should be

considering.

Required:

(a) (i) State how the gift of the 3,000 shares in Happy Home Ltd was taxed. (1 mark)

He has acquired a (comprehensive) knowledge of his subject through reading many new materials and up-to-date publications. 选择能代替括号里的选项

A、extensive

B、comparative

C、subjective

D、excessive

He was reluctant to give up his travel plans but I succeeded in persuading him _____.

A、to do

B、to give up

C、to

D、to do this

_____________. “And nowadays, with more and more people moving to the country, individuals want to put an exclusive finishing touch to their properties. It has been a boost to crafts like mines,”

［A］Graham has become increasingly busy, supplying flat-packed weathervanes to clients worldwide.

［B］Graham decided to concentrate his efforts on a weathervane business. He had served an apprenticeship as a precision engineer and had worked in that trade for 15 years when he and his wife, Liz, agreed to swap roles—she went out to work as an architectural assistant and he stayed at home to look after the children and build up the business.

［C］Last month, a local school was opened with his galleon ship weathervane hoisted above it.

［D］“For centuries, weathervanes have kept communities in touch with the elements, signaling those shifts in wind direction that bring about changes in the weather,” he explains.

［E］Graham has no plans for expansion, as he wants to keep the business as a rural craft.

［F］Graham has now perfected over 100 original designs. He works to very fine detail, always seeking approval for the design of the silhouette from the customer before proceeding with the hand-cutting.