(b) Calculate the amount of input tax that will be recovered by Vostok Ltd in respect of the new premises in theyear ending 31 March 2009 and explain, using illustrative calculations, how any additional recoverable inputtax will be calculated in future ye

第1题：

(b) Calculate the corporation tax (CT) liabilities for Alantech Ltd, Boron Ltd and Bubble Ltd for the year ending

31 December 2004 on the assumption that loss reliefs are taken as early as possible. (9 marks)

正确答案：

(b) Schedule D Case I calculation
The three companies form. a group for both group relief and capital gains purposes as all shareholdings pass the 75%
ownership test. The calculation of the corporation tax liabilities is as follows:

第2题：

3 On 1 January 2007 Dovedale Ltd, a company with no subsidiaries, intends to purchase 65% of the ordinary share

capital of Hira Ltd from Belgrove Ltd. Belgrove Ltd currently owns 100% of the share capital of Hira Ltd and has no

other subsidiaries. All three companies have their head offices in the UK and are UK resident.

Hira Ltd had trading losses brought forward, as at 1 April 2006, of ￡18,600 and no income or gains against which

to offset losses in the year ended 31 March 2006. In the year ending 31 March 2007 the company expects to make

further tax adjusted trading losses of ￡55,000 before deduction of capital allowances, and to have no other income

or gains. The tax written down value of Hira Ltd’s plant and machinery as at 31 March 2006 was ￡96,000 and

there will be no fixed asset additions or disposals in the year ending 31 March 2007. In the year ending 31 March

2008 a small tax adjusted trading loss is anticipated. Hira Ltd will surrender the maximum possible trading losses

to Belgrove Ltd and Dovedale Ltd.

The tax adjusted trading profit of Dovedale Ltd for the year ending 31 March 2007 is expected to be ￡875,000 and

to continue at this level in the future. The profits chargeable to corporation tax of Belgrove Ltd are expected to be

￡38,000 for the year ending 31 March 2007 and to increase in the future.

On 1 February 2007 Dovedale Ltd will sell a small office building to Hira Ltd for its market value of ￡234,000.

Dovedale Ltd purchased the building in March 2005 for ￡210,000. In October 2004 Dovedale Ltd sold a factory

for ￡277,450 making a capital gain of ￡84,217. A claim was made to roll over the gain on the sale of the factory

against the acquisition cost of the office building.

On 1 April 2007 Dovedale Ltd intends to acquire the whole of the ordinary share capital of Atapo Inc, an unquoted

company resident in the country of Morovia. Atapo Inc sells components to Dovedale Ltd as well as to other

companies in Morovia and around the world.

It is estimated that Atapo Inc will make a profit before tax of ￡160,000 in the year ending 31 March 2008 and will

pay a dividend to Dovedale Ltd of ￡105,000. It can be assumed that Atapo Inc’s taxable profits are equal to its profit

before tax. The rate of corporation tax in Morovia is 9%. There is a withholding tax of 3% on dividends paid to

non-Morovian resident shareholders. There is no double tax agreement between the UK and Morovia.

Required:

(a) Advise Belgrove Ltd of any capital gains that may arise as a result of the sale of the shares in Hira Ltd. You

are not required to calculate any capital gains in this part of the question. (4 marks)

正确答案：
(a) Capital gains that may arise on the sale by Belgrove Ltd of shares in Hira Ltd
Belgrove Ltd will realise a capital gain on the sale of the shares unless the substantial shareholding exemption applies. The
exemption will be given automatically provided all of the following conditions are satisfied.
– Belgrove Ltd has owned at least 10% of Hira Ltd for a minimum of 12 months during the two years prior to the sale.
– Belgrove Ltd is a trading company or a member of a trading group during that 12-month period and immediately after
the sale.
– Hira Ltd is a trading company or the holding company of a trading group during that 12-month period and immediately
after the sale.
Hira Ltd will no longer be in a capital gains group with Belgrove Ltd after the sale. Accordingly, a capital gain, known as a
degrouping charge, may arise in Hira Ltd. A degrouping charge will arise if, at the time it leaves the Belgrove Ltd group, Hira
Ltd owns any capital assets which were transferred to it at no gain, no loss within the previous six years by a member of the
Belgrove Ltd capital gains group.

第3题：

(c) Calculate the expected corporation tax liability of Dovedale Ltd for the year ending 31 March 2007 on the

assumption that all available reliefs are claimed by Dovedale Ltd but that Hira Ltd will not claim any capital

allowances in that year. (4 marks)

正确答案：

第4题：

(b) Explain the advantages from a tax point of view of operating the new business as a partnership rather than

as a company whilst it is making losses. You should calculate the tax adjusted trading loss for the year

ending 31 March 2008 for both situations and indicate the years in which the loss relief will be obtained.

You are not required to prepare any other supporting calculations. (10 marks)

正确答案：

(b) The new business
There are two tax advantages to operating the business as a partnership.
(i) Reduction in taxable income
If the new business is operated as a company, Cindy and Arthur would both be taxed at 40% on their salaries. In
addition, employer and employee national insurance contributions would be due on ￡105 (￡5,000 – ￡4,895) in respect
of each of them.
If the new business is operated as a partnership, the partners would have no taxable trading income because the
partnership has made a loss; any salaries paid to the partners would be appropriations of the profit or loss of the
business and not employment income. They would, however, each have to pay Class 2 national insurance contributions
of ￡2·10 each per week.
(ii) Earlier relief for trading losses
If the new business is operated as a company, its tax adjusted trading loss in the year ending 31 March 2008 would
be as follows:

第5题：

(b) Explain the corporation tax and value added tax (VAT) implications of the following aspects of the proposed

restructuring of the Rapier Ltd group.

(i) The immediate tax implications of the restructuring. (6 marks)

正确答案：
(b) The tax implications of the proposed restructuring of the Rapier Ltd group
(i) Immediate implications
Corporation tax
Rapier Ltd and its subsidiaries are in a capital gains group as Rapier Ltd owns at least 75% of the ordinary share capital
of each of the subsidiary companies. Any non-exempt items of plant and machinery owned by the subsidiaries will
therefore be transferred to Rapier Ltd at no gain, no loss.
No taxable credit or allowable debit will arise on the transfer of the subsidiaries’ goodwill to Rapier Ltd because the
companies are in a capital gains group.
The trading losses brought forward in Dirk Ltd will be transferred with the trade to Rapier Ltd as the effective ownership
of the three trades will not change (Rapier Ltd owns the subsidiaries which own the trades and, following the
restructuring, will own the three trades directly). The losses will be restricted to being offset against the future trading
profits of the Dirk trade only.
There will be no balancing adjustments in respect of the plant and machinery transferred to Rapier Ltd. Writing down
allowances will be claimed by the subsidiaries in respect of the year ending 30 June 2007 and by Rapier Ltd in respect
of future periods.
Value added tax (VAT)
No VAT should be charged on the sales of the businesses to Rapier Ltd as they are outside the scope of VAT. This is
because the trades are to be transferred as going concerns to a VAT registered person with no significant break in trading.
Switch Ltd must notify HM Revenue and Customs by 30 July 2007 that it has ceased to make taxable supplies.

第6题：

5 (a) Carver Ltd was incorporated and began trading in August 2002. It is a close company with no associated

companies. It has always prepared accounts to 31 December and will continue to do so in the future.

It has been decided that Carver Ltd will sell its business as a going concern to Blade Ltd, an unconnected

company, on 31 July 2007. Its premises and goodwill will be sold for ￡2,135,000 and ￡290,000 respectively

and its machinery and equipment for ￡187,000. The premises, which do not constitute an industrial building,

were acquired on 1 August 2002 for ￡1,808,000 and the goodwill has been generated internally by the

company. The machinery and equipment cost ￡294,000; no one item will be sold for more than its original cost.

The tax adjusted trading profit of Carver Ltd in 2007, before taking account of both capital allowances and the

sale of the business assets, is expected to be ￡81,000. The balance on the plant and machinery pool for the

purposes of capital allowances as at 31 December 2006 was ￡231,500. Machinery costing ￡38,000 was

purchased on 1 March 2007. Carver Ltd is classified as a small company for the purposes of capital allowances.

On 1 August 2007, the proceeds from the sale of the business will be invested in either an office building or a

portfolio of UK quoted company shares, as follows:

Office building

The office building would be acquired for ￡3,100,000; the vendor is not registered for value added tax (VAT).

Carver Ltd would borrow the additional funds required from a UK bank. The building is let to a number of

commercial tenants who are not connected with Carver Ltd and will pay rent, in total, of ￡54,000 per calendar

quarter, in advance, commencing on 1 August 2007. The company’s expenditure for the period from 1 August

2007 to 31 December 2007 is expected to be:

￡

Loan interest payable to UK bank 16,000

Building maintenance costs 7,500

Share portfolio

Shares would be purchased for the amount of the proceeds from the sale of the business with no need for further

loan finance. It is estimated that the share portfolio would generate dividends of ￡36,000 and capital gains, after

indexation allowance, of ￡10,000 in the period from 1 August 2007 to 31 December 2007.

All figures are stated exclusive of value added tax (VAT).

Required:

(i) Taking account of the proposed sale of the business on 31 July 2007, state with reasons the date(s) on

which Carver Ltd must submit its corporation tax return(s) for the year ending 31 December 2007.

(2 marks)

正确答案：
(a) (i) Due date for submission of corporation tax return
Carver Ltd intends to cease trading on 31 July 2007. This will bring to an end the accounting period that began on
1 January 2007. A new accounting period will commence on 1 August 2007 and end on the company’s accounting
reference date on 31 December 2007.
Carver Ltd is required to submit its corporation tax return by the later of:
– one year after the end of its accounting period; and
– one year after the end of the period of account in which the last day of the accounting period falls.
Accordingly, the company must submit its corporation tax returns for both accounting periods by 31 December 2008.

第7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8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).

正确答案：
(c) Tax implications of there being a loan from Flores Ltd to Banda
Flores Ltd should have paid tax to HMRC equal to 25% of the loan, i.e. ￡5,250. The tax should have been paid on the
company’s normal due date for corporation tax in respect of the accounting period in which the loan was made, i.e. 1 April
following the end of the accounting period.
The tax is due because Flores Ltd is a close company that has made a loan to a participator and that loan is not in the ordinary
course of the company’s business.
HMRC will repay the tax when the loan is either repaid or written off.
Flores Ltd should have included the loan on Banda’s Form. P11D in order to report it to HMRC.
Banda should have paid income tax on an annual benefit equal to 5% of the amount of loan outstanding during each tax
year. Accordingly, for each full year for which the loan was outstanding, Banda should have paid income tax of ￡231
(￡21,000 x 5% x 22%).
Interest and penalties may be charged in respect of the tax underpaid by both Flores Ltd and Banda and in respect of the
incorrect returns made to HMRC
Willingness to act for Banda
We would not wish to be associated with a client who has engaged in deliberate tax evasion as this poses a threat to the
fundamental principles of integrity and professional behaviour. Accordingly, we should refuse to act for Banda unless she is
willing to disclose the details regarding the loan to HMRC and pay the ensuing tax liabilities. Even if full disclosure is made,
we should consider whether the loan was deliberately hidden from HMRC or Banda’s previous tax adviser.
In addition, companies are prohibited from making loans to directors under the Companies Act. We should advise Banda to
seek legal advice on her own position and that of Flores Ltd.

第9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：

5 Gagarin wishes to persuade a number of wealthy individuals who are business contacts to invest in his company,

Vostok Ltd. He also requires advice on the recoverability of input tax relating to the purchase of new premises.

The following information has been obtained from a meeting with Gagarin.

Vostok Ltd:

– An unquoted UK resident company.

– Gagarin owns 100% of the company’s ordinary share capital.

– Has 18 employees.

– Provides computer based services to commercial companies.

– Requires additional funds to finance its expansion.

Funds required by Vostok Ltd:

– Vostok Ltd needs to raise ￡420,000.

– Vostok Ltd will issue 20,000 shares at ￡21 per share on 31 August 2008.

– The new shareholder(s) will own 40% of the company.

– Part of the money raised will contribute towards the purchase of new premises for use by Vostok Ltd.

Gagarin’s initial thoughts:

– The minimum investment will be 5,000 shares and payment will be made in full on subscription.

– Gagarin has a number of wealthy business contacts who may be interested in investing.

– Gagarin has heard that it may be possible to obtain tax relief for up to 60% of the investment via the enterprise

investment scheme.

Wealthy business contacts:

– Are all UK resident higher rate taxpayers.

– May wish to borrow the funds to invest in Vostok Ltd if there is a tax incentive to do so.

New premises:

– Will cost ￡446,500 including value added tax (VAT).

– Will be used in connection with all aspects of Vostok Ltd’s business.

– Will be sold for ￡600,000 plus VAT in six years time.

– Vostok Ltd will waive the VAT exemption on the sale of the building.

The VAT position of Vostok Ltd:

– In the year ending 31 March 2009, 28% of Vostok Ltd’s supplies will be exempt for the purposes of VAT.

– This percentage is expected to reduce over the next few years.

– Irrecoverable input tax due to the company’s partially exempt status exceeds the de minimis limits.

Required:

(a) Prepare notes for Gagarin to use when speaking to potential investors. The notes should include:

(i) The tax incentives immediately available in respect of the amount invested in shares issued in

accordance with the enterprise investment scheme; (5 marks)

正确答案：
(a) (i) The tax incentives immediately available
Income tax
– The investor’s income tax liability for 2008/09 will be reduced by 20% of the amount subscribed for the shares.
– Up to half of the amount invested can be treated as if paid in 2007/08 rather than 2008/09. This is subject to a
maximum carryback of ￡50,000.
This ability to carryback relief to the previous year is useful where the investor’s income in 2008/09 is insufficient
to absorb all of the relief available.
Tutorial note
There would be no change to the income tax liability of 2007/08 where an amount is treated as if paid in that year.
This ensures that such a claim does not affect payments on account under the self assessment system. Instead, the
tax refund due is calculated by reference to 2007/08 but is deducted from the next payment of tax due from the
taxpayer or is repaid to the taxpayer.
Capital gains tax deferral
– For every ￡1 invested in Vostok Ltd, an investor can defer ￡1 of capital gain and thus, potentially, 40 pence of
capital gains tax.
– The gain deferred can be in respect of the disposal of any asset.
– The shares must be subscribed for within the four year period starting one year prior to the date on which the
disposal giving rise to the gain took place.

第12题：

How should a service representative provide closure at the end of a call for a client？（）

A、Explain the issues of the call， the steps taken to resolve them and query the client if they have any additional needs.
B、Explain the solution to the issue and then provide the client with the technicians contact information in case they have any questions.
C、Give the client a technical explanation on the issue and how it was fixed； throw any faulty equipment in the clients garbage.
D、Proceed to the next service call， check back with the client in a week to see if they have any additional needs.

正确答案:A

第13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14题：

(b) Explain by reference to Hira Ltd’s loss position why it may be beneficial for it not to claim any capital

allowances for the year ending 31 March 2007. Support your explanation with relevant calculations.

(6 marks)

正确答案：
(b) The advantage of Hira Ltd not claiming any capital allowances
In the year ending 31 March 2007 Hira Ltd expects to make a tax adjusted trading loss, before deduction of capital
allowances, of ￡55,000 and to surrender the maximum amount possible of trading losses to Belgrove Ltd and Dovedale Ltd.
For the first nine months of the year from 1 April 2006 to 31 December 2006 Hira Ltd is in a loss relief group with Belgrove
Ltd. The maximum surrender to Belgrove Ltd for this period is the lower of:
– the available loss of ￡41,250 (￡55,000 x 9/12); and
– the profits chargeable to corporation tax of Belgrove of ￡28,500 (￡38,000 x 9/12).
i.e. ￡28,500. This leaves losses of ￡12,750 (￡41,250 – ￡28,500) unrelieved.
For the remaining three months from 1 January 2007 to 31 March 2007 Hira Ltd is a consortium company because at least
75% of its share capital is owned by companies, each of which own at least 5%. It can surrender ￡8,938 (￡55,000 x 3/12
x 65%) to Dovedale Ltd and ￡4,812 (￡55,000 x 3/12 x 35%) to Belgrove Ltd as both companies have sufficient taxable
profits to offset the losses. Accordingly, there are no losses remaining from the three-month period.
The unrelieved losses from the first nine months must be carried forward as Hira Ltd has no income or gains in that year or
the previous year. However, the losses cannot be carried forward beyond 1 January 2007 (the date of the change of
ownership of Hira Ltd) if there is a major change in the nature or conduct of the trade of Hira Ltd. Even if the losses can be
carried forward, the earliest year in which they can be relieved is the year ending 31 March 2009 as Hira Ltd is expected to
make a trading loss in the year ending 31 March 2008.
Any capital allowances claimed by Hira Ltd in the year ending 31 March 2007 would increase the tax adjusted trading loss
for that year and consequently the unrelieved losses arising in the first nine months.
If the capital allowances are not claimed, the whole of the tax written down value brought forward of ￡96,000 would be
carried forward to the year ending 31 March 2008 thus increasing the capital allowances and the tax adjusted trading loss,
for that year. By not claiming any capital allowances, Hira Ltd can effectively transfer a current period trading loss, which
would be created by capital allowances, of ￡24,000 (25% x ￡96,000) from the year ending 31 March 2007 to the following
year where it can be surrendered to the two consortium members.

第15题：

(d) Explain whether or not Dovedale Ltd, Hira Ltd and Atapo Inc can register as a group for the purposes of value

added tax. (3 marks)

正确答案：
(d) Dovedale Ltd and Hira Ltd can register as a group for the purposes of value added tax (VAT) because Dovedale Ltd controls
Hira Ltd and both companies are established in the UK in that their head offices are in the UK.
Dovedale Ltd will also control Atapo Inc. However, Atapo Inc cannot be part of a group registration unless it is established
in the UK or has a fixed establishment in the UK. It will be regarded as established in the UK if it is centrally managed and
controlled in the UK or if its head office is in the UK. A fixed establishment is a place where the company has staff and
equipment and where its business is carried on.

第16题：

(ii) Calculate the corporation tax (CT) payable by Tay Limited for the year ended 31 March 2006, taking

advantage of all available reliefs. (3 marks)

正确答案：

第17题：

(iii) The effect of the restructuring on the group’s ability to recover directly and non-directly attributable input

tax. (6 marks)

You are required to prepare calculations in respect of part (ii) only of this part of this question.

Note: – You should assume that the corporation tax rates and allowances for the financial year 2006 apply

throughout this question.

正确答案：

(iii) The effect of the restructuring on the group’s ability to recover its input tax
Prior to the restructuring
Rapier Ltd and Switch Ltd make wholly standard rated supplies and are in a position to recover all of their input tax
other than that which is specifically blocked. Dirk Ltd and Flick Ltd are unable to register for VAT as they do not make
taxable supplies. Accordingly, they cannot recover any of their input tax.
Following the restructuring
Rapier Ltd will be carrying on four separate trades, two of which involve the making of exempt supplies such that it will
be a partially exempt trader. Its recoverable input tax will be calculated as follows.
– Input tax in respect of inputs wholly attributable to taxable supplies is recoverable.
– Input tax in respect of inputs wholly attributable to exempt supplies cannot be recovered (subject to the de minimis
limits below).
– A proportion of the company’s residual input tax, i.e. input tax in respect of inputs which cannot be directly
attributed to particular supplies, is recoverable. The proportion is taxable supplies (VAT exclusive) divided by total
supplies (VAT exclusive). This proportion is rounded up to the nearest whole percentage where total residual input
tax is no more than ￡400,000 per quarter.
The balance of the residual input tax cannot be recovered (subject to the de minimis limits below).
– If the de minimis limits are satisfied, Rapier Ltd will be able to recover all of its input tax (other than that which is
specifically blocked) including that which relates to exempt supplies. The de minimis limits are satisfied where the
irrecoverable input tax:
– is less than or equal to ￡625 per month on average; and
– is less than or equal to 50% of total input tax.
The impact of the restructuring on the group’s ability to recover its input tax will depend on the level of supplies made
by the different businesses and the amounts of input tax involved. The restructuring could result in the group being able
to recover all of its input tax (if the de minimis limits are satisfied). Alternatively the amount of irrecoverable input tax
may be more or less than the amounts which cannot be recovered by Dirk Ltd and Flick Ltd under the existing group
structure.

第18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：

第19题：

(b) The tax relief available in respect of the anticipated trading losses, together with supporting calculations and

a recommended structure for the business. (16 marks)

正确答案：

Aral Ltd owned by Banda
The losses would have to be carried forward and deducted from the trading profits of the year ending 30 June 2010.
Aral Ltd cannot offset the loss in the current period or carry it back as it has no other income or gains.
Aral Ltd owned by Flores Ltd
The two companies will form. a group relief group if Flores Ltd owns at least 75% of the ordinary share capital of Aral
Ltd. The trading losses could be surrendered to Flores Ltd in the year ending 30 June 2008 and the year ending
30 June 2009. The total tax saved would be ￡11,079 ((￡38,696 + ￡19,616) x 19%)
Recommended structure
The Aral business should be established in a company owned by Flores Ltd.
This will maximise the relief available in respect of the trading losses and enable relief to be obtained in the period in
which the losses are incurred.
Tutorial note
The whole of the loss for the period ending 30 June 2008 can be surrendered to Flores Ltd as it is less than that
company’s profit for the corresponding period, i.e. ￡60,000 (￡120,000 x 6/12).

第20题：

3 Palm plc recently acquired 100% of the ordinary share capital of Nikau Ltd from Facet Ltd. Palm plc intends to use

Nikau Ltd to develop a new product range, under the name ‘Project Sabal’. Nikau Ltd owns shares in a non-UK

resident company, Date Inc.

The following information has been extracted from client files and from a meeting with the Finance Director of Palm

plc.

Palm plc:

– Has more than 40 wholly owned subsidiaries such that all group companies pay corporation tax at 30%.

– All group companies prepare accounts to 31 March.

– Acquired Nikau Ltd on 1 November 2007 from Facet Ltd, an unrelated company.

Nikau Ltd:

– UK resident company that manufactures domestic electronic appliances for sale in the European Union (EU).

– Large enterprise for the purposes of the enhanced relief available for research and development expenditure.

– Trading losses brought forward as at 1 April 2007 of ￡195,700.

– Budgeted taxable trading profit of ￡360,000 for the year ending 31 March 2008 before taking account of ‘Project

Sabal’.

– Dividend income of ￡38,200 will be received in the year ending 31 March 2008 in respect of the shares in Date

Inc.

‘Project Sabal’:

– Development of a range of electronic appliances, for sale in North America.

– Project Sabal will represent a significant advance in the technology of domestic appliances.

– Nikau Ltd will spend ￡70,000 on staffing costs and consumables researching and developing the necessary

technology between now and 31 March 2008. Further costs will be incurred in the following year.

– Sales to North America will commence in 2009 and are expected to generate significant profits from that year.

Shares in Date Inc:

– Nikau Ltd owns 35% of the ordinary share capital of Date Inc.

– The shares were purchased from Facet Ltd on 1 June 2003 for their market value of ￡338,000.

– The sale was a no gain, no loss transfer for the purposes of corporation tax.

– Facet Ltd purchased the shares in Date Inc on 1 March 1994 for ￡137,000.

Date Inc:

– A controlled foreign company resident in the country of Palladia.

– Annual chargeable profits arising out of property investment activities are approximately ￡120,000, of which

approximately ￡115,000 is distributed to its shareholders each year.

The tax system in Palladia:

– No taxes on income or capital profits.

– 4% withholding tax on dividends paid to shareholders resident outside Palladia.

Required:

(a) Prepare detailed explanatory notes, including relevant supporting calculations, on the effect of the following

issues on the amount of corporation tax payable by Nikau Ltd for the year ending 31 March 2008.

(i) The costs of developing ‘Project Sabal’ and the significant commercial changes to the company’s

activities arising out of its implementation. (8 marks)

正确答案：
(a) Nikau Ltd – Effect on corporation tax payable for the year ending 31 March 2008
(i) Project Sabal
Research and development expenditure
The expenditure incurred in respect of research and development will give rise to an enhanced deduction for the
purposes of computing the taxable trading profits of Nikau Ltd. The enhanced deduction is 125% of the qualifying
expenditure as Nikau Ltd is a large enterprise for this purpose.
The expenditure will reduce the profits chargeable to corporation tax of Nikau Ltd by ￡87,500 (￡70,000 x 1·25) and
its corporation tax liability by ￡26,250 (￡87,500 x 30%).
The budgeted expenditure will qualify for the enhanced deduction because it appears to satisfy the following conditions.
– It is likely to qualify as research and development expenditure within generally accepted accounting principles as
it will result in new technical knowledge and the production of a substantially improved device for use in the
industry.
– It exceeds ￡10,000 in Nikau Ltd’s accounting period.
– It relates to staff costs, consumable items or other qualifying expenditure as opposed to capital items.
– It will result in further trading activities for Nikau Ltd.
Use of brought forward trading losses
The development of products for the North American market is likely to represent a major change in the nature and
conduct of the trade of Nikau Ltd. This is because the company is developing new products and intends to sell them in
a new market. It is a major change as sales to North America are expected to generate significant additional profits.
Because this change will occur within three years of the change in the ownership of Nikau Ltd on 1 November 2007,
any trading losses arising prior to that date cannot be carried forward beyond that date.
Accordingly, the trading losses brought forward may only be offset against ￡158,958 ((￡360,000 – ￡87,500) x 7/12)
of the company’s trading profits for the year. The remainder of the trading losses ￡36,742 (￡195,700 – ￡158,958) will
be lost resulting in lost tax relief of ￡11,023 (￡36,742 x 30%).
Tutorial note
The profits for the year ending 31 March 2008 will be apportioned to the periods pre and post 1 November 2007 on
either a time basis or some other basis that is just and reasonable.

第21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)

正确答案：
(b) (i) UK tax on the rental income
Coral is UK resident in 2007/08 because she is present in the UK for more than 182 days. Accordingly, she will be
subject to UK income tax on her Kalanian rental income.
Coral is ordinarily resident in the UK in 2007/08 as she is habitually resident in the UK.
Coral will have acquired a domicile of origin in Kalania from her father. She has not acquired a domicile of choice in the
UK as she has not severed her ties with Kalania and does not intend to make her permanent home in the UK.
Accordingly, the rental income will be taxed in the UK on the remittance basis.
Any rental income remitted to the UK will fall into the basic rate band and will be subject to income tax at 22% on the
gross amount (before deduction of Kalanian tax). Unilateral double tax relief will be available in respect of the 8% tax
suffered in Kalania such that the effective rate of tax suffered by Coral in the UK on the grossed up amount of income
remitted will be 14%.
In order to minimise the total income tax suffered on the rental income Coral should ensure that it is not brought into or
used in the UK such that it will not be subject to income tax in the UK.
Coral should retain evidence, for example bank statements, to show that the rental income has not been removed from
Kalania. Coral can use the money whilst she is on holiday in Kalania with no UK tax implications.

第22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23题：

(b) Explain what effect the acquisition of Di Rollo Co will have on the planning of your audit of the consolidated

financial statements of Murray Co for the year ending 31 March 2008. (10 marks)

正确答案：
(b) Effect of acquisition on planning the audit of Murray’s consolidated financial statements for the year ending 31 March
2008
Group structure
The new group structure must be ascertained to identify all entities that should be consolidated into the Murray group’s
financial statements for the year ending 31 March 2008.
Materiality assessment
Preliminary materiality for the group will be much higher, in monetary terms, than in the prior year. For example, if a % of
total assets is a determinant of the preliminary materiality, it may be increased by 10% (as the fair value of assets acquired,
including goodwill, is $2,373,000 compared with $21·5m in Murray’s consolidated financial statements for the year ended
31 March 2007).
The materiality of each subsidiary should be re-assessed, in terms of the enlarged group as at the planning stage. For
example, any subsidiary that was just material for the year ended 31 March 2007 may no longer be material to the group.
This assessment will identify, for example:
– those entities requiring an audit visit; and
– those entities for which substantive analytical procedures may suffice.
As Di Rollo’s assets are material to the group Ross should plan to inspect the South American operations. The visit may
include a meeting with Di Rollo’s previous auditors to discuss any problems that might affect the balances at acquisition and
a review of the prior year audit working papers, with their permission.
Di Rollo was acquired two months into the financial year therefore its post-acquisition results should be expected to be
material to the consolidated income statement.
Goodwill acquired
The assets and liabilities of Di Rollo at 31 March 2008 will be combined on a line-by-line basis into the consolidated financial
statements of Murray and goodwill arising on acquisition recognised.
Audit work on the fair value of the Di Rollo brand name at acquisition, $600,000, may include a review of a brand valuation
specialist’s working papers and an assessment of the reasonableness of assumptions made.
Significant items of plant are likely to have been independently valued prior to the acquisition. It may be appropriate to plan
to place reliance on the work of expert valuers. The fair value adjustment on plant and equipment is very high (441% of
carrying amount at the date of acquisition). This may suggest that Di Rollo’s depreciation policies are over-prudent (e.g. if
accelerated depreciation allowed for tax purposes is accounted for under local GAAP).
As the amount of goodwill is very material (approximately 50% of the cash consideration) it may be overstated if Murray has
failed to recognise any assets acquired in the purchase of Di Rollo in accordance with IFRS 3 Business Combinations. For
example, Murray may have acquired intangible assets such as customer lists or franchises that should be recognised
separately from goodwill and amortised (rather than tested for impairment).
Subsequent impairment
The audit plan should draw attention to the need to consider whether the Di Rollo brand name and goodwill arising have
suffered impairment as a result of the allegations against Di Rollo’s former chief executive.
Liabilities
Proceedings in the legal claim made by Di Rollo’s former chief executive will need to be reviewed. If the case is not resolved
at 31 March 2008, a contingent liability may require disclosure in the consolidated financial statements, depending on the
materiality of amounts involved. Legal opinion on the likelihood of Di Rollo successfully defending the claim may be sought.
Provision should be made for any actual liabilities, such as legal fees.
Group (related party) transactions and balances
A list of all the companies in the group (including any associates) should be included in group audit instructions to ensure
that intra-group transactions and balances (and any unrealised profits and losses on transactions with associates) are
identified for elimination on consolidation. Any transfer pricing policies (e.g. for clothes manufactured by Di Rollo for Murray
and sales of Di Rollo’s accessories to Murray’s retail stores) must be ascertained and any provisions for unrealised profit
eliminated on consolidation.
It should be confirmed at the planning stage that inter-company transactions are identified as such in the accounting systems
of all companies and that inter-company balances are regularly reconciled. (Problems are likely to arise if new inter-company
balances are not identified/reconciled. In particular, exchange differences are to be expected.)
Other auditors
If Ross plans to use the work of other auditors in South America (rather than send its own staff to undertake the audit of Di
Rollo), group instructions will need to be sent containing:
– proforma statements;
– a list of group and associated companies;
– a statement of group accounting policies (see below);
– the timetable for the preparation of the group accounts (see below);
– a request for copies of management letters;
– an audit work summary questionnaire or checklist;
– contact details (of senior members of Ross’s audit team).
Accounting policies
Di Rollo may have material accounting policies which do not comply with the rest of the Murray group. As auditor to Di Rollo,
Ross will be able to recalculate the effect of any non-compliance with a group accounting policy (that Murray’s management
would be adjusting on consolidation).
Timetable
The timetable for the preparation of Murray’s consolidated financial statements should be agreed with management as soon
as possible. Key dates should be planned for:
– agreement of inter-company balances and transactions;
– submission of proforma statements;
– completion of the consolidation package;
– tax review of group accounts;
– completion of audit fieldwork by other auditors;
– subsequent events review;
– final clearance on accounts of subsidiaries;
– Ross’s final clearance of consolidated financial statements.
Tutorial note: The order of dates is illustrative rather than prescriptive.

(b) Calculate the amount of input tax that will be recovered by Vostok Ltd in respect of the new premises in theyear ending 31 March 2009 and explain, using illustrative calculations, how any additional recoverable inputtax will be calculated in future ye

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