(ii) Following on from your answer to (i), evaluate the two purchase proposals, and advise Bill and Ben
which course of action will result in the highest amount of after tax cash being received by the
shareholders if the disposal takes place on 31 March 2006. (4 marks)
第1题:
(ii) Assuming that Donald operates through a company, advise Donald on the corporation tax (CT) that
would be payable for the year ended 31 March 2007 if he pays himself a gross salary of £31,000, plus
a net dividend of £10,000, instead of a gross salary of £42,648. (4 marks)
第2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)
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3题:
(ii) Advise Benny of the amount of tax he could save by delaying the sale of the shares by 30 days. For the
purposes of this part, you may assume that the benefit in respect of the furnished flat is £11,800 per
year. (3 marks)
第4题:
(ii) Compute the annual income tax saving from your recommendation in (i) above as compared with the
situation where Cindy retains both the property and the shares. Identify any other tax implications
arising from your recommendation. Your answer should consider all relevant taxes. (3 marks)
第5题:
4 (a) For this part, assume today’s date is 1 March 2006.
Bill and Ben each own 50% of the ordinary share capital in Flower Limited, an unquoted UK trading company
that makes electronic toys. Flower Limited was incorporated on 1 August 2005 with 1,000 £1 ordinary shares,
and commenced trading on the same day. The business has been successful, and the company has accumulated
a large cash balance of £180,000, which is to be used to purchase a new factory. However, Bill and Ben have
received an offer from a rival company, which they are considering. The offer provides Bill and Ben with two
alternative methods of payment for the purchase of their shares:
(i) £480,000 for the company, inclusive of the £180,000 cash balance.
(ii) £300,000 for the company assuming the cash available for the factory purchase is extracted prior to sale.
Bill and Ben each currently receive a gross salary of £3,750 per month from Flower Limited. Part of the offer
terms is that Bill and Ben would be retained as employees of the company on the same salary.
Neither Bill nor Ben has used any of their capital gains tax annual exemption for the tax year 2005/06.
Required:
(i) Calculate which of the following means of extracting the £180,000 from Flower Limited on 31 March
2006 will result in the highest after tax cash amount for Bill and Ben:
(1) payment of a dividend, or
(2) payment of a salary bonus.
You are not required to consider the corporation tax (CT) implications for Flower Limited in your
answer. (5 marks)
As a result, Bill and Ben would each be better off by £15,005 (69,142 – 54,137). If the cash were extracted by way
of dividend.
Tutorial note: In this answer the employers’ national insurance liability on the salary has been ignored. Credit would be
given to a candidate who recognised this issue.
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)
第7题:
(ii) Advise Clifford of the capital gains tax implications of the alternative of selling the Oxford house and
garden by means of two separate disposals as proposed. Calculations are not required for this part of
the question. (3 marks)
第8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9题:
Which of the following operations need NOT to be entered on the Oil Record Book Part I? I、Disposal of oil residues. II、 Internal transfer of fuel oil
A.I only
B.II only
C.both I and II
D.neither I nor II
第10题:
第11题:
We have received with thanks your fax of March 30 and () to reply as follows.
第12题:
第13题:
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.
第14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)
第15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)
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)
第17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)
第18题:
(b) (i) Advise Andrew of the income tax (IT) and capital gains tax (CGT) reliefs available on his investment in
the ordinary share capital of Scalar Limited, together with any conditions which need to be satisfied.
Your answer should clearly identify any steps that should be taken by Andrew and the other investors
to obtain the maximum relief. (13 marks)
第19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)
第20题:
(ii) On 1 July 2006 Petrie introduced a 10-year warranty on all sales of its entire range of stainless steel
cookware. Sales of stainless steel cookware for the year ended 31 March 2007 totalled $18·2 million. The
notes to the financial statements disclose the following:
‘Since 1 July 2006, the company’s stainless steel cookware is guaranteed to be free from defects in
materials and workmanship under normal household use within a 10-year guarantee period. No provision
has been recognised as the amount of the obligation cannot be measured with sufficient reliability.’
(4 marks)
Your auditor’s report on the financial statements for the year ended 31 March 2006 was unmodified.
Required:
Identify and comment on the implications of these two matters for your auditor’s report on the financial
statements of Petrie Co for the year ended 31 March 2007.
NOTE: The mark allocation is shown against each of the matters above.
第21题:
(a) The following information relates to Crosswire a publicly listed company.
Summarised statements of financial position as at:
The following information is available:
(i) During the year to 30 September 2009, Crosswire embarked on a replacement and expansion programme for its non-current assets. The details of this programme are:
On 1 October 2008 Crosswire acquired a platinum mine at a cost of $5 million. A condition of mining the
platinum is a requirement to landscape the mining site at the end of its estimated life of ten years. The
present value of this cost at the date of the purchase was calculated at $3 million (in addition to the
purchase price of the mine of $5 million).
Also on 1 October 2008 Crosswire revalued its freehold land for the first time. The credit in the revaluation
reserve is the net amount of the revaluation after a transfer to deferred tax on the gain. The tax rate applicable to Crosswire for deferred tax is 20% per annum.
On 1 April 2009 Crosswire took out a finance lease for some new plant. The fair value of the plant was
$10 million. The lease agreement provided for an initial payment on 1 April 2009 of $2·4 million followed
by eight six-monthly payments of $1·2 million commencing 30 September 2009.
Plant disposed of during the year had a carrying amount of $500,000 and was sold for $1·2 million. The
remaining movement on the property, plant and equipment, after charging depreciation of $3 million, was
the cost of replacing plant.
(ii) From 1 October 2008 to 31 March 2009 a further $500,000 was spent completing the development
project at which date marketing and production started. The sales of the new product proved disappointing
and on 30 September 2009 the development costs were written down to $1 million via an impairment
charge.
(iii) During the year ended 30 September 2009, $4 million of the 10% convertible loan notes matured. The
loan note holders had the option of redemption at par in cash or to exchange them for equity shares on the
basis of 20 new shares for each $100 of loan notes. 75% of the loan-note holders chose the equity option.
Ignore any effect of this on the other equity reserve.
All the above items have been treated correctly according to International Financial Reporting Standards.
(iv) The finance costs are made up of:
Required:
(i) Prepare a statement of the movements in the carrying amount of Crosswire’s non-current assets for the
year ended 30 September 2009; (9 marks)
(ii) Calculate the amounts that would appear under the headings of ‘cash flows from investing activities’
and ‘cash flows from financing activities’ in the statement of cash flows for Crosswire for the year ended
30 September 2009.
Note: Crosswire includes finance costs paid as a financing activity. (8 marks)
(b) A substantial shareholder has written to the directors of Crosswire expressing particular concern over the
deterioration of the company’s return on capital employed (ROCE)
Required:
Calculate Crosswire’s ROCE for the two years ended 30 September 2008 and 2009 and comment on the
apparent cause of its deterioration.
Note: ROCE should be taken as profit before interest on long-term borrowings and tax as a percentage of equity plus loan notes and finance lease obligations (at the year end). (8 marks)
第22题:
第23题: