问答题 5.Cate requires advice on the after-tax cost of taking on a part-time employee and the tax implications of starting to sell items via the internet. Cate’s husband, Ravi, requires advice in relation to capital gains tax on the disposal of an overseas asset. Cate: – Is resident and domiciled in the UK. She is aged 48. – Is married to Ravi. – Runs a successful unincorporated business, D-Designs. – Receives dividends of ￡27,000 each year. – Wants to sell some second-hand books online. D-Designs business: – Was set up by Cate in 2008. – Is now making a taxable profit of ￡90,000 per annum. – Operates a number of dress shops and already employs six full-time staff. – Requires an additional part-time employee. Part-time employee – proposed remuneration package: – Salary of ￡12,000 per annum. – Qualifying childcare vouchers of ￡25 per week for 52 weeks a year. – Mileage allowance of 50 pence per mile for the 62-mile round trip required each week to redistribute stock between the shops. This will be for 48 weeks in the year. – This employment will be the employee’s only source of taxable income. Sale of second-hand books: – Cate inherited a collection of books from her mother in December 2013. – Cate intends to sell these books via the internet. – Some of the books are in a damaged state and Cate will get them rebound before selling them. Ravi: – Is domiciled in the country of Goland. – Has been resident in the UK since his marriage to Cate in February 2007. – Has UK taxable income of ￡125,000 in the tax year 2014/15. – Realises chargeable gains each year from disposals of UK assets equal to the capital gains tax annual exempt amount. – Sold an investment property in Goland in February 2015 for ￡130,000, realising a chargeable gain of ￡70,000.None of the proceeds from the sale of this property have been remitted to the UK. Required:
问答题 (a) Calculate the annual cost for Cate, after income tax and national insurance contributions, of D-Designs employing the part-time employee. (9 marks)
【正确答案】Cate – after-tax cost of taking on the part-time employee Tutorial note: The ￡2,000 employment allowance would already have been fully offset against the Class 1 NICs payable in respect of D-Designs’ existing employees. 2. Personal allowance
【答案解析】
问答题 (b) Discuss whether the profit from Cate’s proposed sale of books via the internet will be liable to either income tax or capital gains tax. (5 marks)
【正确答案】Cate – sale of second-hand books The tax treatment of the income from the sale of the second-hand books will depend on whether or not Cate is deemed to be carrying on a trade of selling books. If she is, the income will be treated as trading income, and subject to income tax in the same way as her taxable profits from D-Designs. If not, then the sales will be dealt with under the capital gains tax rules. In determining how Cate should be taxed, HMRC will make reference to the ‘badges of trade’, a series of factors to be considered in order to determine whether or not an individual is trading. In this case, the key relevant factors would include: Factors indicating that the sale of books does not constitute a trade: – the fact that Cate has inherited the books; she did not buy them for resale; – selling second-hand books is not related in any way to her existing business, the running of a chain of dress shops; – the frequency of transactions; this would appear to be a one-off batch of sales. Factor indicating that the sale of books does constitute a trade: – having some of the books rebound may be viewed as ‘supplementary work’ in order to generate increased profit. Based on the above factors, it is more likely that the capital gains tax treatment will apply. For capital gains tax purposes books are chattels so, as no individual book is likely to have a value in excess of ￡6,000, if the capital gains tax treatment does apply, any gains made by Cate will be exempt from tax. Tutorial note: Marks were available for discussion of any relevant factors and for reaching a sensible conclusion.
【答案解析】
问答题 (c) Advise Ravi on the options available to him for calculating his UK capital gains tax liability for the tax year 2014/15. Provide supporting calculations of the tax payable by him in each case. (6 marks)
【正确答案】Ravi – capital gains tax on overseas property gain Ravi is resident in the UK, so would normally be liable to pay UK capital gains tax on disposals of both his UK and overseas assets on an arising basis. On this basis, the gain on the disposal of the overseas property is fully liable to UK capital gains tax, as his annual exempt amount for the tax year 2014/15 has already been used. As Ravi is a higher rate taxpayer, capital gains tax will be charged at the rate of 28% and the capital gains tax payable will therefore be ￡19,600 (￡70,000 x 28%). Double tax relief will be available against this UK capital gains tax liability for any tax suffered on the same gain in Goland. However, as Ravi is not domiciled in the UK, he should consider making a claim for the remittance basis for the taxation of his overseas gain. As he has not remitted any of the proceeds from the sale, if he makes such a claim, there will be no gain chargeable in the UK. However, he will lose his entitlement to the annual exempt amount, which will generate an additional capital gains tax liability of ￡3,080 (￡11,000 x 28%) on his UK asset gains. Additionally, as Ravi has been resident in the UK since February 2007 (at least seven out of the last nine tax years), he will be liable to pay a remittance basis charge of ￡30,000. The total amount payable as a result of claiming the remittance basis would therefore be ￡33,080 (￡3,080 +￡30,000). Therefore a remittance basis claim will not be worthwhile for the tax year 2014/15.
【答案解析】