问答题
Trifles Ltd intends to carry out a purchase of its own shares. The shareholders from whom the shares are to be
purchased require advice on their tax position. Trifles Ltd also intends to loan a motorcycle to one of the
shareholders.
The following information has been obtained from the shareholders in Trifles Ltd.
Trifles Ltd:
- Is an unquoted company specialising in the delivery of small, high value items.
- Was incorporated and began trading on 1 February 2005.
- Has an issued share capital of 10,000 ordinary shares subscribed for at ￡2 per share.
- Has four unrelated shareholders: Torte, Baklava, Victoria and Melba.
- Intends to purchase some of its own shares from Victoria and Melba.
- Victoria and Melba have been directors of the company since they acquired their shares but will resign
immediately after the purchase of their shares.
The purchase by Trifles Lid of its own shares:
- Will take place on 28 February 2013 for Victoria's shares, and on 31 March 2013 for Melba's shares at an
agreed price of ￡30 per share.
- Will consist of the purchase of all of Victoria's shares and 450 shares from Melba.
Victoria:
- Is resident and ordinarily resident in the UK.
- Has taxable income of ￡40,000 in 2012/13.
- Will make no other capital disposals in the tax year 2012/13.
- Has a capital loss carried forward as at 5 April 2012 of ￡3,800.
- Will have no link with Trifles Ltd following the purchase of her shares.
- Inherited her holding of 1,500 ordinary shares on the death of her husband, Brownie, on 1 February 2011.
- Brownie paid ￡16,500 for the shares on 1 February 2009.
- The probate value of the 1,500 ordinary shares was ￡16,000 on 1 February 2011.
Melba:
- Is resident and ordinarily resident in the UK.
- Has taxable income of ￡40,000 in 2012/13.
- Acquired her holding of 1,700 ordinary shares when Trifles Ltd was incorporated.
- Following the purchase of her shares Melba's only link with Trifles Ltd will be her remaining ordinary
shareholding and the use of a motorcycle belonging to the company.
The motorcycle:
- Will be purchased by Trifles Ltd for ￡9,000 on 1 April 2013.
- Will be made available on loan to Melba for the whole of the tax year 2013/14.
- Melba will pay Trifles Ltd ￡30 per month for the use of the motorcycle.
Required
(a) Explain whether or not Victoria and/or Melba satisfy the conditions relating to period of ownership and
reduction in level of shareholding such that the amount received from Trifles Ltd on the purchase of own
shares may be treated as capital.
(b) Calculate Victoria's after tax proceeds from the purchase of her shares:
- if the amount received is treated as capital; and
- if the amount received is treated as income.
(c) Explain, with supporting calculations where necessary, the tax implications of the purchase and loan of the
motorcycle for both Melba and Trifles Ltd.
Note: ignore value added tax (VAT).
You should assume that the tax rates and allowances of the tax year 2011/12 and for the financial year to 31 March
2012 will continue to apply for the foreseeable future.
purchased require advice on their tax position. Trifles Ltd also intends to loan a motorcycle to one of the
shareholders.
The following information has been obtained from the shareholders in Trifles Ltd.
Trifles Ltd:
- Is an unquoted company specialising in the delivery of small, high value items.
- Was incorporated and began trading on 1 February 2005.
- Has an issued share capital of 10,000 ordinary shares subscribed for at ￡2 per share.
- Has four unrelated shareholders: Torte, Baklava, Victoria and Melba.
- Intends to purchase some of its own shares from Victoria and Melba.
- Victoria and Melba have been directors of the company since they acquired their shares but will resign
immediately after the purchase of their shares.
The purchase by Trifles Lid of its own shares:
- Will take place on 28 February 2013 for Victoria's shares, and on 31 March 2013 for Melba's shares at an
agreed price of ￡30 per share.
- Will consist of the purchase of all of Victoria's shares and 450 shares from Melba.
Victoria:
- Is resident and ordinarily resident in the UK.
- Has taxable income of ￡40,000 in 2012/13.
- Will make no other capital disposals in the tax year 2012/13.
- Has a capital loss carried forward as at 5 April 2012 of ￡3,800.
- Will have no link with Trifles Ltd following the purchase of her shares.
- Inherited her holding of 1,500 ordinary shares on the death of her husband, Brownie, on 1 February 2011.
- Brownie paid ￡16,500 for the shares on 1 February 2009.
- The probate value of the 1,500 ordinary shares was ￡16,000 on 1 February 2011.
Melba:
- Is resident and ordinarily resident in the UK.
- Has taxable income of ￡40,000 in 2012/13.
- Acquired her holding of 1,700 ordinary shares when Trifles Ltd was incorporated.
- Following the purchase of her shares Melba's only link with Trifles Ltd will be her remaining ordinary
shareholding and the use of a motorcycle belonging to the company.
The motorcycle:
- Will be purchased by Trifles Ltd for ￡9,000 on 1 April 2013.
- Will be made available on loan to Melba for the whole of the tax year 2013/14.
- Melba will pay Trifles Ltd ￡30 per month for the use of the motorcycle.
Required
(a) Explain whether or not Victoria and/or Melba satisfy the conditions relating to period of ownership and
reduction in level of shareholding such that the amount received from Trifles Ltd on the purchase of own
shares may be treated as capital.
(b) Calculate Victoria's after tax proceeds from the purchase of her shares:
- if the amount received is treated as capital; and
- if the amount received is treated as income.
(c) Explain, with supporting calculations where necessary, the tax implications of the purchase and loan of the
motorcycle for both Melba and Trifles Ltd.
Note: ignore value added tax (VAT).
You should assume that the tax rates and allowances of the tax year 2011/12 and for the financial year to 31 March
2012 will continue to apply for the foreseeable future.
【正确答案】Text references. Repurchase of own shares is covered in Chapter 23 and close companies are dealt with in Chapter
25.
Top tips. If you are asked to compute tax on an extra amount of income, you should compute tax at the marginal
rate on that extra income rather than produce a full income tax computation. Note the acceptable 'short cut' of
computing higher rate tax on dividend income using the 25% rate.
Easy marks. The calculation of the capital receipt was relatively straightforward.
Examiner's comments. Part (a) required candidates to explain whether two of the conditions necessary to enable
the amount received to be treated as capital were satisfied. Many candidates answered this part well but others,
with similar knowledge levels, did not perform well because they failed to answer the question. Rather than
addressing the two particular conditions set out in the question, this latter group attempted to address all of the
conditions despite the majority of them being irrelevant.
Candidates had a good knowledge of the five-year rule and the 30% rule but were much less comfortable with the
condition relating to the shareholder's interest in the company following the purchase. The rules require the
shareholder's interest to be no more than 75% of the interest prior to the purchase - this is not the same as the
shareholder selling 25% of his shares because the shares sold are cancelled thus reducing the number of issued
shares.
Only a minority of candidates were aware that the ownership period of the husband could be added to that of the
wife. Even fewer knew that the usual five-year ownership period is reduced to three where the shares are inherited.
Part (b) required calculations of the after tax proceeds depending on the tax treatment of the sum received. This
part was answered well by the vast majority of candidates. The only point that many candidates missed was the
availability of entrepreneurs' relief. It was particularly pleasing to see the majority of candidates correctly identify
the after tax proceeds as the amount received less the tax liability (as opposed to the taxable amount less the tax
liability).
The final part of the question was more difficult and, unsurprisingiy, caused more problems. The question
concerned the loan of a motorcycle to a shareholder in a close company who was not an employee. Candidates had
no problem recognising that the company was a close company but many then decided that this was a loan to a
participator as opposed to the loan of an asset.
Another relatively common error was to state, correctly, that the benefit would be treated as a distribution but to
then give an incorrect tax rate of 40%. Candidates would benefit from slowing down and ensuring that they apply
their basic tax knowledge correctly in the exam.
25.
Top tips. If you are asked to compute tax on an extra amount of income, you should compute tax at the marginal
rate on that extra income rather than produce a full income tax computation. Note the acceptable 'short cut' of
computing higher rate tax on dividend income using the 25% rate.
Easy marks. The calculation of the capital receipt was relatively straightforward.
Examiner's comments. Part (a) required candidates to explain whether two of the conditions necessary to enable
the amount received to be treated as capital were satisfied. Many candidates answered this part well but others,
with similar knowledge levels, did not perform well because they failed to answer the question. Rather than
addressing the two particular conditions set out in the question, this latter group attempted to address all of the
conditions despite the majority of them being irrelevant.
Candidates had a good knowledge of the five-year rule and the 30% rule but were much less comfortable with the
condition relating to the shareholder's interest in the company following the purchase. The rules require the
shareholder's interest to be no more than 75% of the interest prior to the purchase - this is not the same as the
shareholder selling 25% of his shares because the shares sold are cancelled thus reducing the number of issued
shares.
Only a minority of candidates were aware that the ownership period of the husband could be added to that of the
wife. Even fewer knew that the usual five-year ownership period is reduced to three where the shares are inherited.
Part (b) required calculations of the after tax proceeds depending on the tax treatment of the sum received. This
part was answered well by the vast majority of candidates. The only point that many candidates missed was the
availability of entrepreneurs' relief. It was particularly pleasing to see the majority of candidates correctly identify
the after tax proceeds as the amount received less the tax liability (as opposed to the taxable amount less the tax
liability).
The final part of the question was more difficult and, unsurprisingiy, caused more problems. The question
concerned the loan of a motorcycle to a shareholder in a close company who was not an employee. Candidates had
no problem recognising that the company was a close company but many then decided that this was a loan to a
participator as opposed to the loan of an asset.
Another relatively common error was to state, correctly, that the benefit would be treated as a distribution but to
then give an incorrect tax rate of 40%. Candidates would benefit from slowing down and ensuring that they apply
their basic tax knowledge correctly in the exam.
【答案解析】