问答题
Fedora wants to improve the overall financial position of his family and his company, Smoke Ltd. He is considering
three possibilities: repaying a loan to the company, employing his wife, Wanda, in the business, and selling a piece
of land owned by the company.
The following information has been obtained from a telephone conversation with Fedora and from client files.
Fedora:
- Fedora's only income is his annual salary of ￡80,000 from Smoke Ltd together with annual taxable benefits
of ￡6,600.
- Fedora is aged 49.
Smoke Ltd:
- Is wholly owned by Fedora.
- Manufactures precision engineering tools.
- Has a year end of 31 March and pays corporation tax at the small profits rate.
Fedora's plans:
- Repay an interest-free loan of ￡18,400 made to him by Smoke Ltd in February 2007.
- Smoke Ltd to employ Wanda.
- Smoke Ltd to sell part of the land surrounding its factory.
Smoke Ltd to employ Wanda:
- Wanda would carry out duties currently performed by Fedora and would be paid an annual salary of
￡20,000.
- Wanda's Salary would represent an arm's length price for the work that she would perform.
- Fedora's salary would be reduced by ￡20,000 to reflect the reduction in the level of his duties.
- Wanda's only income is bank interest of ￡1,470 per year. She has notified the bank that she is a non-
taxpayer.
- Wanda is aged 43.
Smoke Lid to sell land:
- The land is currently used by Smoke Ltd for parking vehicles.
- The land was purchased together with the factory on 1 April 1995 for ￡174,000.
- The land would be sold on 1 February 2013 for ￡22,000.
- The value of the factory together with the remaining unsold land on 1 February 2013 will be ￡491,000.
- Smoke Ltd will use ￡19,000 of the sales proceeds to acquire engineering machinery in March 2013.
Required
(a) Explain, with the aid of supporting calculations, the tax implications for both Fedora and Smoke Ltd of the
proposed repayment by Fedora of the loan from Smoke Ltd.
(b) Calculate the annual net effect on the total of the tax liabilities of Fedora, Wanda and Smoke Ltd of Smoke
Ltd employing Wanda under the arrangements set out above.
(c) Calculate the taxable gain arising on the sale of the land in the year ending 31 March 2013 on the
assumption that any beneficial claim available is made. Explain in detail the beneficial claim available, state
the amount of the gain relieved and the manner in which any deferred part of the gain will be charged in the
future.
You should assume that the tax rules and rates for 2011/12 and Financial Year 2011 continue to apply in
subsequent years.
Note: The following figures from the Retail Prices Index should be used.
April 1995 149.0
February 2013 240.6 (assumed)
three possibilities: repaying a loan to the company, employing his wife, Wanda, in the business, and selling a piece
of land owned by the company.
The following information has been obtained from a telephone conversation with Fedora and from client files.
Fedora:
- Fedora's only income is his annual salary of ￡80,000 from Smoke Ltd together with annual taxable benefits
of ￡6,600.
- Fedora is aged 49.
Smoke Ltd:
- Is wholly owned by Fedora.
- Manufactures precision engineering tools.
- Has a year end of 31 March and pays corporation tax at the small profits rate.
Fedora's plans:
- Repay an interest-free loan of ￡18,400 made to him by Smoke Ltd in February 2007.
- Smoke Ltd to employ Wanda.
- Smoke Ltd to sell part of the land surrounding its factory.
Smoke Ltd to employ Wanda:
- Wanda would carry out duties currently performed by Fedora and would be paid an annual salary of
￡20,000.
- Wanda's Salary would represent an arm's length price for the work that she would perform.
- Fedora's salary would be reduced by ￡20,000 to reflect the reduction in the level of his duties.
- Wanda's only income is bank interest of ￡1,470 per year. She has notified the bank that she is a non-
taxpayer.
- Wanda is aged 43.
Smoke Lid to sell land:
- The land is currently used by Smoke Ltd for parking vehicles.
- The land was purchased together with the factory on 1 April 1995 for ￡174,000.
- The land would be sold on 1 February 2013 for ￡22,000.
- The value of the factory together with the remaining unsold land on 1 February 2013 will be ￡491,000.
- Smoke Ltd will use ￡19,000 of the sales proceeds to acquire engineering machinery in March 2013.
Required
(a) Explain, with the aid of supporting calculations, the tax implications for both Fedora and Smoke Ltd of the
proposed repayment by Fedora of the loan from Smoke Ltd.
(b) Calculate the annual net effect on the total of the tax liabilities of Fedora, Wanda and Smoke Ltd of Smoke
Ltd employing Wanda under the arrangements set out above.
(c) Calculate the taxable gain arising on the sale of the land in the year ending 31 March 2013 on the
assumption that any beneficial claim available is made. Explain in detail the beneficial claim available, state
the amount of the gain relieved and the manner in which any deferred part of the gain will be charged in the
future.
You should assume that the tax rules and rates for 2011/12 and Financial Year 2011 continue to apply in
subsequent years.
Note: The following figures from the Retail Prices Index should be used.
April 1995 149.0
February 2013 240.6 (assumed)
【正确答案】Text references. Close companies are covered in Chapter 25 and employment benefits and NICs in Chapter 4.
Chapter 1 deals with the income tax computation. Chargeable gains for companies are covered in Chapter 21.
Top tips. The key to getting part (b) correct is to think through the taxes that are payable by an individual on
employment income and by a company in relation to its employees. Remember that secondary NICs are a
deductible expense for the company so a decrease in secondary NlCs payable will result in an increase in
corporation tax.
Easy marks. Part (c) had some easy marks for the computation of a chargeable gain for a company.
Examiner's comments. Part (a) concerned the repayment of a loan by Fedora to his wholly-owned company,
Smoke Ltd. Most candidates identified Smoke Ltd as a close company and went on to point out that the 25%
charge paid when the loan was made would be refunded once the loan had been repaid. However, for many
candidates that was the end of the story. Stronger candidates pointed out that there would no longer be an income
tax liability for Fedora in respect of the employment benefit and the best candidates went on to point out that,
consequently, there would no longer be a Class 1A liability for Smoke Ltd. Identifying all of these points was not
difficult; most of the candidates in the exam were fully aware of them. However, you will only pick up all of these
points if you think about the issues before you start writing.
Part (b) required calculations of the tax implications of Smoke Ltd employing Fedora's wife. Although many
candidates scored well here, a little bit of thought would have made things much easier. In particular, it was clear
that Fedora was a higher rate tax payer and therefore, the tax saved if his salary was reduced by ￡20,000 would be
￡8,000 together with national insurance of ￡400 (at 2%). Many candidates prepared a page or more of calculations
of the income tax and national insurance due on the both the old and the new salaries in order to arrive at the
difference of ￡8,400. This represented a lack of thought and a waste of valuable time as the figure of ￡8,400 was
only worth one mark.
The final part of the question required the calculation of the gain on a part disposal of land and a detailed
explanation of the relief available. The calculation was done well. However, although the majority of candidates
recognised that the relief available was rollover relief, the majority of explanations were not detailed and did not
consider a sufficient number of the relevant rules. In particular, many candidates failed to identify that the
engineering machinery would be a depreciating asset for the purposes of rollover relief. This may be explained in
part by the fact that this was, for many candidates, their final question and time was running out.
(a) Repayment of loan by Smoke Ltd to Fedora
Smoke Ltd is a close company (as it is controlled by Fedora), that has made a loan to a participator (Fedora).
Smoke Ltd will therefore have paid HM Revenue and Customs ￡18,400 × 25% = ￡4,600 on 1 January 2008.
HMRC will repay the ￡4,600 to the company nine months after the end of the accounting period in which the
loan is repaid.
The loan also gives rise to an annual employment income benefit for Fedora of ￡18,400 × 4% = ￡736. This
benefit will no longer be charged to income tax once the loan is repaid, saving Fedora ￡736 × 40% = ￡294
each year. In addition, Smoke Ltd will no longer have to pay class 1A national insurance contributions in
respect of the loan benefit. This will save the company ￡736 × 13.8% × 80% = ￡81.
(b) Annual net effect of Smoke employing Wanda
Increase/
(decrease) in tax
￡
Fedora
Income tax reduction ￡20,000 @ 40% (8,000)
NICs reduction ￡20,000 @ 2% (400)
Wanda
Income tax increase ￡20,000 - (7,475 - 1,470) = 13,995 @ 20% 2,799
NlCs payable ￡(20,000- 7,225) = 12,775 @ 12% 1,533
Smoke Ltd
NIC reduction ￡7,072 @ 13.8% (976)
CT increase on NIOs reduction ￡976 @ 20% 195
Annual net decrease in tax (4,849)
(c) Sale of land
￡
Disposal proceeds 22,000
Less: cost
22,000
(7,462)
14,538
Less: indexation allowance
Chapter 1 deals with the income tax computation. Chargeable gains for companies are covered in Chapter 21.
Top tips. The key to getting part (b) correct is to think through the taxes that are payable by an individual on
employment income and by a company in relation to its employees. Remember that secondary NICs are a
deductible expense for the company so a decrease in secondary NlCs payable will result in an increase in
corporation tax.
Easy marks. Part (c) had some easy marks for the computation of a chargeable gain for a company.
Examiner's comments. Part (a) concerned the repayment of a loan by Fedora to his wholly-owned company,
Smoke Ltd. Most candidates identified Smoke Ltd as a close company and went on to point out that the 25%
charge paid when the loan was made would be refunded once the loan had been repaid. However, for many
candidates that was the end of the story. Stronger candidates pointed out that there would no longer be an income
tax liability for Fedora in respect of the employment benefit and the best candidates went on to point out that,
consequently, there would no longer be a Class 1A liability for Smoke Ltd. Identifying all of these points was not
difficult; most of the candidates in the exam were fully aware of them. However, you will only pick up all of these
points if you think about the issues before you start writing.
Part (b) required calculations of the tax implications of Smoke Ltd employing Fedora's wife. Although many
candidates scored well here, a little bit of thought would have made things much easier. In particular, it was clear
that Fedora was a higher rate tax payer and therefore, the tax saved if his salary was reduced by ￡20,000 would be
￡8,000 together with national insurance of ￡400 (at 2%). Many candidates prepared a page or more of calculations
of the income tax and national insurance due on the both the old and the new salaries in order to arrive at the
difference of ￡8,400. This represented a lack of thought and a waste of valuable time as the figure of ￡8,400 was
only worth one mark.
The final part of the question required the calculation of the gain on a part disposal of land and a detailed
explanation of the relief available. The calculation was done well. However, although the majority of candidates
recognised that the relief available was rollover relief, the majority of explanations were not detailed and did not
consider a sufficient number of the relevant rules. In particular, many candidates failed to identify that the
engineering machinery would be a depreciating asset for the purposes of rollover relief. This may be explained in
part by the fact that this was, for many candidates, their final question and time was running out.
(a) Repayment of loan by Smoke Ltd to Fedora
Smoke Ltd is a close company (as it is controlled by Fedora), that has made a loan to a participator (Fedora).
Smoke Ltd will therefore have paid HM Revenue and Customs ￡18,400 × 25% = ￡4,600 on 1 January 2008.
HMRC will repay the ￡4,600 to the company nine months after the end of the accounting period in which the
loan is repaid.
The loan also gives rise to an annual employment income benefit for Fedora of ￡18,400 × 4% = ￡736. This
benefit will no longer be charged to income tax once the loan is repaid, saving Fedora ￡736 × 40% = ￡294
each year. In addition, Smoke Ltd will no longer have to pay class 1A national insurance contributions in
respect of the loan benefit. This will save the company ￡736 × 13.8% × 80% = ￡81.
(b) Annual net effect of Smoke employing Wanda
Increase/
(decrease) in tax
￡
Fedora
Income tax reduction ￡20,000 @ 40% (8,000)
NICs reduction ￡20,000 @ 2% (400)
Wanda
Income tax increase ￡20,000 - (7,475 - 1,470) = 13,995 @ 20% 2,799
NlCs payable ￡(20,000- 7,225) = 12,775 @ 12% 1,533
Smoke Ltd
NIC reduction ￡7,072 @ 13.8% (976)
CT increase on NIOs reduction ￡976 @ 20% 195
Annual net decrease in tax (4,849)
(c) Sale of land
￡
Disposal proceeds 22,000
Less: cost
22,000(7,462)
14,538
Less: indexation allowance
【答案解析】