问答题
Stanley Beech, a self-employed landscape gardener, intends to transfer his business to Landscape Ltd, a company
formed for this purpose.
The following information has been extracted from client files and from meetings with Stanley.
Stanley:
· Acquired a storage building for ￡46,000 on 1 July 2002 and began trading.
· Has no other sources of income.
· Has capital losses brought forward from 2006/07 of ￡10,900.
The whole of the business is to be transferred to Landscape Ltd on I September 2012:
· The market value of the assets to be transferred is ￡118,000.
· The assets include the storage building and goodwill, valued at ￡87,000 and ￡24,000 respectively, and
various small pieces of equipment and consumable stores.
· Landscape Ltd will issue 5,000 ￡1 ordinary shares as consideration for the transfer.
Advice given to Stanley in respect of the sale of the business:
· 'No capital gains tax will arise on the transfer of your business to the company.'
· 'You should take approximately 30% of the payment from Landscape Ltd in shares with the balance left on a
loan account payable to you by the company, such that you can receive a cash payment in the future.'
Advice given to Stanley in respect of his annual remuneration from Landscape Ltd:
· 'The payment of a dividend of ￡21,000 is more tax efficient than paying a salary bonus of ￡21,000 as you
will pay income tax at only 25% on the dividend received, whereas you would pay income tax at 40% on a
salary bonus. The dividend also avoids the need to pay national insurance contributions.'
· 'There is no tax in respect of an interest free loan from an employer of less than ￡5,000.'
· 'The provision of a company car is tax neutral as the cost of providing it is deductible in the corporation tax
computation.'
Stanley's proposed remuneration package from Landscape Ltd:
· An annual salary of ￡40,000 and an annual dividend of approximately ￡21,000.
· On 1 December 2012 an interest free loan of ￡3,600, which he intends to repay in two years' time.
· A company car with list price of ￡19,000. The only costs incurred by the company in respect of this car will be
lease rentals of ￡300 per month and business fuel of ￡100 per month.
· The annual employment income benefit in respect of the car is to be taken as ￡3,420.
Landscape Ltd:
· Will prepare accounts to 31 March each year.
· Will pay corporation tax at the rate of 20%.
Required
(a) (i) Explain why there would be no capital gains tax liability on the transfer of Stanley's business to
Landscape Ltd in exchange for shares. Calculate the maximum loan account balance that Stanley
could receive without giving rise to a capital gains tax liability and state the resulting capital gains tax
base cost of the shares.
(ii) Explain the benefit to Stanley of taking part of the payment for the sale of his business in the form of
a loan account, which is to be paid out in cash at some time in the future.
(b) Comment on the accuracy and completeness of the advice received by Stanley in respect of his
remuneration package. Supporting calculations are only required in respect of the company car.
Ignore value added tax (VAT) in answering this question.
You may assume that the rates and allowances for the financial year to 31 March 2012 and the tax year 2011/12 will
continue to apply for the foreseeable future.
formed for this purpose.
The following information has been extracted from client files and from meetings with Stanley.
Stanley:
· Acquired a storage building for ￡46,000 on 1 July 2002 and began trading.
· Has no other sources of income.
· Has capital losses brought forward from 2006/07 of ￡10,900.
The whole of the business is to be transferred to Landscape Ltd on I September 2012:
· The market value of the assets to be transferred is ￡118,000.
· The assets include the storage building and goodwill, valued at ￡87,000 and ￡24,000 respectively, and
various small pieces of equipment and consumable stores.
· Landscape Ltd will issue 5,000 ￡1 ordinary shares as consideration for the transfer.
Advice given to Stanley in respect of the sale of the business:
· 'No capital gains tax will arise on the transfer of your business to the company.'
· 'You should take approximately 30% of the payment from Landscape Ltd in shares with the balance left on a
loan account payable to you by the company, such that you can receive a cash payment in the future.'
Advice given to Stanley in respect of his annual remuneration from Landscape Ltd:
· 'The payment of a dividend of ￡21,000 is more tax efficient than paying a salary bonus of ￡21,000 as you
will pay income tax at only 25% on the dividend received, whereas you would pay income tax at 40% on a
salary bonus. The dividend also avoids the need to pay national insurance contributions.'
· 'There is no tax in respect of an interest free loan from an employer of less than ￡5,000.'
· 'The provision of a company car is tax neutral as the cost of providing it is deductible in the corporation tax
computation.'
Stanley's proposed remuneration package from Landscape Ltd:
· An annual salary of ￡40,000 and an annual dividend of approximately ￡21,000.
· On 1 December 2012 an interest free loan of ￡3,600, which he intends to repay in two years' time.
· A company car with list price of ￡19,000. The only costs incurred by the company in respect of this car will be
lease rentals of ￡300 per month and business fuel of ￡100 per month.
· The annual employment income benefit in respect of the car is to be taken as ￡3,420.
Landscape Ltd:
· Will prepare accounts to 31 March each year.
· Will pay corporation tax at the rate of 20%.
Required
(a) (i) Explain why there would be no capital gains tax liability on the transfer of Stanley's business to
Landscape Ltd in exchange for shares. Calculate the maximum loan account balance that Stanley
could receive without giving rise to a capital gains tax liability and state the resulting capital gains tax
base cost of the shares.
(ii) Explain the benefit to Stanley of taking part of the payment for the sale of his business in the form of
a loan account, which is to be paid out in cash at some time in the future.
(b) Comment on the accuracy and completeness of the advice received by Stanley in respect of his
remuneration package. Supporting calculations are only required in respect of the company car.
Ignore value added tax (VAT) in answering this question.
You may assume that the rates and allowances for the financial year to 31 March 2012 and the tax year 2011/12 will
continue to apply for the foreseeable future.
【正确答案】Text references, incorporation relief is covered in Chapter 13. Remuneration packages are dealt with in Chapter 30.
Top tips. This question is actually two virtually separate questions carrying equal marks. You might have started
with part (b) as this was slightly easier. Note that supporting calculations were only required in relation to the
company car so don't waste time doing other ones.
Easy marks. The rules on dividend versus salary are a basic tax planning point and should have gained easy marks.
(a) Sale of business
(i) Transfer of business to Landscape Ltd
If Stanley transfers his entire business (ie all the assets, excluding cash) to Landscape Ltd (LL) there
would be no capital gains tax because of the automatic availability of incorporation relief.
This would allow the gain arising on the transfer of any chargeable assets used in the business to be
deferred until such time as Stanley sells the shares in LL. This occurs because the deferred gain
reduces the base cost of the shares received on incorporation.
The full gain may be deferred to the extent that shares are received in exchange for the business. If
any other form of consideration is received eg cash, loan notes or loan, a gain will arise in direct
proportion to the amount of non-share consideration received.
Therefore if Stanley leaves some of the consideration outstanding on loan account a gain will arise in
respect of that proportion of consideration. Entrepreneurs' relief can apply to this gain.
The maximum loan account balance that Stanley could receive without giving rise to a CGT liability
would be ￡39,031. This is calculated as follows:
Gain on building
￡
Proceeds (MV) 87,000
Less: cost (46,000)
Gain before reliefs 41,000
Gain on goodwill
￡
Proceeds (MV) 24,000
Less: cost (nil)
Gain before reliefs 24,000
Gain on plant and machinery/consumables
Plant & machinery would have had capital allowances claimed on them, and any loss would have
been taken through the capital allowances computation. There is therefore no capital loss.
The consumables are not chargeable assets and are therefore exempt from CGT.
The total gains before reliefs are therefore (￡41,000 + ￡24,000) = ￡65,000.
It is easiest to calculate the amount of relief required to ensure no CGT arises by working backwards
from the annual exempt amount:
￡
Annual exempt amount 10,600
Add: losses b/f 10,900
Gain 21,500
Less: total gain (65,000)
Incorporation relief required 43,500
The proportion of consideration that Stanley would need to receive in shares to arrive at this amount
of incorporation relief would be:
Top tips. This question is actually two virtually separate questions carrying equal marks. You might have started
with part (b) as this was slightly easier. Note that supporting calculations were only required in relation to the
company car so don't waste time doing other ones.
Easy marks. The rules on dividend versus salary are a basic tax planning point and should have gained easy marks.
(a) Sale of business
(i) Transfer of business to Landscape Ltd
If Stanley transfers his entire business (ie all the assets, excluding cash) to Landscape Ltd (LL) there
would be no capital gains tax because of the automatic availability of incorporation relief.
This would allow the gain arising on the transfer of any chargeable assets used in the business to be
deferred until such time as Stanley sells the shares in LL. This occurs because the deferred gain
reduces the base cost of the shares received on incorporation.
The full gain may be deferred to the extent that shares are received in exchange for the business. If
any other form of consideration is received eg cash, loan notes or loan, a gain will arise in direct
proportion to the amount of non-share consideration received.
Therefore if Stanley leaves some of the consideration outstanding on loan account a gain will arise in
respect of that proportion of consideration. Entrepreneurs' relief can apply to this gain.
The maximum loan account balance that Stanley could receive without giving rise to a CGT liability
would be ￡39,031. This is calculated as follows:
Gain on building
￡
Proceeds (MV) 87,000
Less: cost (46,000)
Gain before reliefs 41,000
Gain on goodwill
￡
Proceeds (MV) 24,000
Less: cost (nil)
Gain before reliefs 24,000
Gain on plant and machinery/consumables
Plant & machinery would have had capital allowances claimed on them, and any loss would have
been taken through the capital allowances computation. There is therefore no capital loss.
The consumables are not chargeable assets and are therefore exempt from CGT.
The total gains before reliefs are therefore (￡41,000 + ￡24,000) = ￡65,000.
It is easiest to calculate the amount of relief required to ensure no CGT arises by working backwards
from the annual exempt amount:
￡
Annual exempt amount 10,600
Add: losses b/f 10,900
Gain 21,500
Less: total gain (65,000)
Incorporation relief required 43,500
The proportion of consideration that Stanley would need to receive in shares to arrive at this amount
of incorporation relief would be:
【答案解析】