问答题
Ernest intends to sell a capital asset on 1 February 2013 and wishes to maximise his after tax sales proceeds He is
also seeking advice on his inheritance tax position and on his will.
The following information has been obtained from a telephone conversation with Ernest and from client files.
Ernest:
- Is 54 years old and unmarried.
- Lives with Georgina, who is 48 years old, and her adult daughter, Eileen.
- Earns a salary of ￡130,000 per year.
- Has as yet made no disposals of capital assets in the tax year 2012/13.
- Intends to sell either an oil painting or 7,700 shares in Neutron Ltd on 1 February 2013
Oil painting:
- Ernest inherited the painting on the death of his uncle on 1 May 2007 when it was worth ￡23,300.
- Ernest's uncle purchased the painting on 1 July 1993 for ￡19,500.
- The painting is expected to be worth ￡47,000 on 1 February 2013.
Shares in Neutron Ltd:
- Qualified for income tax relief under the enterprise investment scheme (EIS) although Ernest did not claim
any relief.
- 1 April 2004 Ernest subscribed for 18,600 shares at ￡8.90 per share.
- 1 March 2006 Ernest received a 1 for 4 bonus issue.
- 1 July 2009 Ernest purchased his full entitlement under a 1 for 10 rights issue at ￡4.20 per share.
- The shares are expected to be worth ￡5 each on 1 February 2013.
Neutron Lid:
- Has an issued share capital of two million ￡1 ordinary shares.
- Is not quoted on any stock exchange.
- Manufactures and distributes radiation measuring equipment.
Inheritance tax planning and wills:
- Neither Ernest nor Georgina have made any lifetime gifts.
- In his will, Ernest has left the whole of his estate to Georgina.
- In her will, Georgina has left the whole of her estate to Eileen.
- Ernest and Georgina wish to minimise their total inheritance tax liability.
- They are willing to make lifetime gifts to each other but not to Eileen or any other person or organisation.
Current market values of assets owned:
Ernest Georgina
￡ ￡
Family home 620,000 -
Antiques and works of art 400,000 60,000
Investment property 380,000 -
Shares in Neutron Ltd 127,875 -
Required
(a) Prepare calculations of the after tax sales proceeds that would be realised on the proposed sale of the
painting and on the proposed sale of the shares on 1 February 2013.
Note: you should assume that Ernest will make any necessary beneficial claims or elections.
(b) Prepare brief notes explaining the inheritance tax liabilities that will arise on the deaths of Ernest and
Georgina if no action is taken to reduce such liabilities; identify any actions that could be taken in order to
reduce these liabilities and explain the inheritance tax and capital gains tax implications of these actions.
Note: you are not required to prepare calculations for part (b) of this question.
Assume that the tax rules and rates for 2011/12 continue to apply in subsequent years.
also seeking advice on his inheritance tax position and on his will.
The following information has been obtained from a telephone conversation with Ernest and from client files.
Ernest:
- Is 54 years old and unmarried.
- Lives with Georgina, who is 48 years old, and her adult daughter, Eileen.
- Earns a salary of ￡130,000 per year.
- Has as yet made no disposals of capital assets in the tax year 2012/13.
- Intends to sell either an oil painting or 7,700 shares in Neutron Ltd on 1 February 2013
Oil painting:
- Ernest inherited the painting on the death of his uncle on 1 May 2007 when it was worth ￡23,300.
- Ernest's uncle purchased the painting on 1 July 1993 for ￡19,500.
- The painting is expected to be worth ￡47,000 on 1 February 2013.
Shares in Neutron Ltd:
- Qualified for income tax relief under the enterprise investment scheme (EIS) although Ernest did not claim
any relief.
- 1 April 2004 Ernest subscribed for 18,600 shares at ￡8.90 per share.
- 1 March 2006 Ernest received a 1 for 4 bonus issue.
- 1 July 2009 Ernest purchased his full entitlement under a 1 for 10 rights issue at ￡4.20 per share.
- The shares are expected to be worth ￡5 each on 1 February 2013.
Neutron Lid:
- Has an issued share capital of two million ￡1 ordinary shares.
- Is not quoted on any stock exchange.
- Manufactures and distributes radiation measuring equipment.
Inheritance tax planning and wills:
- Neither Ernest nor Georgina have made any lifetime gifts.
- In his will, Ernest has left the whole of his estate to Georgina.
- In her will, Georgina has left the whole of her estate to Eileen.
- Ernest and Georgina wish to minimise their total inheritance tax liability.
- They are willing to make lifetime gifts to each other but not to Eileen or any other person or organisation.
Current market values of assets owned:
Ernest Georgina
￡ ￡
Family home 620,000 -
Antiques and works of art 400,000 60,000
Investment property 380,000 -
Shares in Neutron Ltd 127,875 -
Required
(a) Prepare calculations of the after tax sales proceeds that would be realised on the proposed sale of the
painting and on the proposed sale of the shares on 1 February 2013.
Note: you should assume that Ernest will make any necessary beneficial claims or elections.
(b) Prepare brief notes explaining the inheritance tax liabilities that will arise on the deaths of Ernest and
Georgina if no action is taken to reduce such liabilities; identify any actions that could be taken in order to
reduce these liabilities and explain the inheritance tax and capital gains tax implications of these actions.
Note: you are not required to prepare calculations for part (b) of this question.
Assume that the tax rules and rates for 2011/12 continue to apply in subsequent years.
【正确答案】Text references. Calculation of capital gains tax is covered in Chapter 11. Shares are dealt with in Chapter 12.
Share loss relief is covered in Chapter 8. Inheritance tax is dealt with in Chapters 16 to 18.
Top tips. You must make sure you follow any notes the examiner gives you. In part (a), the examiner told you to
assume that Ernest will make any necessary beneficial claims or elections (so you should look out for what might
be available). In part (b), the examiner stated that you were not required to prepare calculations so you should
assume that no marks were allocated for calculations.
Easy marks. There were easy marks for the computation of the gain on the painting and the loss on the shares,
even if you did not spot the loss relief for unquoted shares.
Examiner's comments. Part (a) required calculations of the after tax sales proceeds on the sale of a painting and
some shares. Almost all candidates scored high marks for this part. However, a significant minority merely
calculated tax liabilities and not the after tax proceeds. This was important as the sale of the shares resulted in a
loss such that, before taking account of the relief available in respect of the loss, the after tax sales proceeds was
simply the proceeds and not zero as many candidates wrote. There was also a common technical error in the
answers to this question in that many candidates incorrectly treated the rights issue shares as a separate
identifiable acquisition rather than as part of the original purchase. The ability to offset the loss on the shares
against income was a tricky point that was missed by the majority of candidates.
Part (b) required candidates to consider the inheritance tax position of an unmarried couple with unequal estates.
This part of the question was done well by the majority of those who attempted it and there was clearly a good
knowledge of the subject. However, many candidates would have scored more marks if they had slowed down,
written less and thought more. For example, it was relatively common for candidates to omit any reference to
business property relief even though they were probably well aware of the existence of the relief. The candidates
who did best worked their way through the question logically and addressed specifics. They considered what would
happen on the death of Ernest followed by the death of Georgina and then what would happen if the deaths
occurred the other way around. They then explained, in a clear and succinct manner, the need to transfer assets to
Georgina.
Share loss relief is covered in Chapter 8. Inheritance tax is dealt with in Chapters 16 to 18.
Top tips. You must make sure you follow any notes the examiner gives you. In part (a), the examiner told you to
assume that Ernest will make any necessary beneficial claims or elections (so you should look out for what might
be available). In part (b), the examiner stated that you were not required to prepare calculations so you should
assume that no marks were allocated for calculations.
Easy marks. There were easy marks for the computation of the gain on the painting and the loss on the shares,
even if you did not spot the loss relief for unquoted shares.
Examiner's comments. Part (a) required calculations of the after tax sales proceeds on the sale of a painting and
some shares. Almost all candidates scored high marks for this part. However, a significant minority merely
calculated tax liabilities and not the after tax proceeds. This was important as the sale of the shares resulted in a
loss such that, before taking account of the relief available in respect of the loss, the after tax sales proceeds was
simply the proceeds and not zero as many candidates wrote. There was also a common technical error in the
answers to this question in that many candidates incorrectly treated the rights issue shares as a separate
identifiable acquisition rather than as part of the original purchase. The ability to offset the loss on the shares
against income was a tricky point that was missed by the majority of candidates.
Part (b) required candidates to consider the inheritance tax position of an unmarried couple with unequal estates.
This part of the question was done well by the majority of those who attempted it and there was clearly a good
knowledge of the subject. However, many candidates would have scored more marks if they had slowed down,
written less and thought more. For example, it was relatively common for candidates to omit any reference to
business property relief even though they were probably well aware of the existence of the relief. The candidates
who did best worked their way through the question logically and addressed specifics. They considered what would
happen on the death of Ernest followed by the death of Georgina and then what would happen if the deaths
occurred the other way around. They then explained, in a clear and succinct manner, the need to transfer assets to
Georgina.
【答案解析】