问答题
Boson has been living overseas and is about to return to the UK. He requires advice on his capital gains tax position
and on whether to retain an overseas investment property or to sell it and invest the funds in the UK.
The following information has been obtained from telephone conversations with Boson.
Boson's current position:
- He is UK domiciled.
- He had lived in the UK all of his life until he moved to the country of Higgsia on 1 January 2008.
- He sold shares in Meson plc whilst living in Higgsia.
- He purchased a house in Higgsia but retained his principal private residence in the UK.
Boson's future:
- Boson plans to return permanently to his home in the UK on 20 January 2013.
- He has signed an employment contract with Graviton Ltd, which commences on 15 April 2013.
- He is considering selling the house in Higgsia and investing the after tax proceeds in a portfolio of quoted
shares in UK companies or, alternatively, retaining the house and renting it out.
Sales of shares in Meson plc:
- Meson plc is a UK resident quoted company.
- Boson inherited 19,500 shares on 1 August 2001 when they were worth ￡2 each.
- Boson sold 10,000 shares on 1 May 2008 for ￡11 each.
- Boson sold the remaining shares on 1 November 2012 for ￡15 each.
House in the country of Higgsia:
- Purchased by Boson on 1 May 2008 for ￡105,000.
- Could be rented out for ￡11,000 per year after deduction of allowable expenses.
- Is currently worth and could be sold for ￡200,000.
The tax system in the country of Higgsia:
- Non-residents of Higgsia are charged income tax at 30% on income arising in the country of Higgsia.
- No capital gains tax.
- No double tax treaty with the UK.
Employment contract with Graviton Ltd:
- Boson will be paid an annual salary of ￡35,200.
Portfolio of quoted shares:
- The portfolio would be expected to generate annual dividends at the rate of approximately 4.3% of the
capital invested.
Required
(a) Advise Boson, by reference to his residence and ordinary residence position, as to whether the sales of the
shares in Meson pic on 1 May 2008 and 1 November 2012 and the possible sale of the house in the country
of Higgsia will be subject to capital gains tax. State what he should do in order to ensure that any gains
arising are not subject to capital gains tax.
Note: you are not required to prepare calculations for part (a) of this question.
(b) (i) Calculate Boson's annual rental income after deduction of all taxes in respect of the house in Higgsia.
(ii) On the assumption that the house in Higgsia is sold for ￡200,000, with no capital gains tax payable,
calculate the annual after tax income generated if the whole amount is invested in the portfolio of
quoted shares.
(iii) Calculate the maximum by which the rate of return on the portfolio of quoted shares could fall before
the after tax income generated would cease to exceed the return from renting out the house in
Higgsia.
Assume that the tax rules and rates for 2011/12 continue to apply in subsequent years.
and on whether to retain an overseas investment property or to sell it and invest the funds in the UK.
The following information has been obtained from telephone conversations with Boson.
Boson's current position:
- He is UK domiciled.
- He had lived in the UK all of his life until he moved to the country of Higgsia on 1 January 2008.
- He sold shares in Meson plc whilst living in Higgsia.
- He purchased a house in Higgsia but retained his principal private residence in the UK.
Boson's future:
- Boson plans to return permanently to his home in the UK on 20 January 2013.
- He has signed an employment contract with Graviton Ltd, which commences on 15 April 2013.
- He is considering selling the house in Higgsia and investing the after tax proceeds in a portfolio of quoted
shares in UK companies or, alternatively, retaining the house and renting it out.
Sales of shares in Meson plc:
- Meson plc is a UK resident quoted company.
- Boson inherited 19,500 shares on 1 August 2001 when they were worth ￡2 each.
- Boson sold 10,000 shares on 1 May 2008 for ￡11 each.
- Boson sold the remaining shares on 1 November 2012 for ￡15 each.
House in the country of Higgsia:
- Purchased by Boson on 1 May 2008 for ￡105,000.
- Could be rented out for ￡11,000 per year after deduction of allowable expenses.
- Is currently worth and could be sold for ￡200,000.
The tax system in the country of Higgsia:
- Non-residents of Higgsia are charged income tax at 30% on income arising in the country of Higgsia.
- No capital gains tax.
- No double tax treaty with the UK.
Employment contract with Graviton Ltd:
- Boson will be paid an annual salary of ￡35,200.
Portfolio of quoted shares:
- The portfolio would be expected to generate annual dividends at the rate of approximately 4.3% of the
capital invested.
Required
(a) Advise Boson, by reference to his residence and ordinary residence position, as to whether the sales of the
shares in Meson pic on 1 May 2008 and 1 November 2012 and the possible sale of the house in the country
of Higgsia will be subject to capital gains tax. State what he should do in order to ensure that any gains
arising are not subject to capital gains tax.
Note: you are not required to prepare calculations for part (a) of this question.
(b) (i) Calculate Boson's annual rental income after deduction of all taxes in respect of the house in Higgsia.
(ii) On the assumption that the house in Higgsia is sold for ￡200,000, with no capital gains tax payable,
calculate the annual after tax income generated if the whole amount is invested in the portfolio of
quoted shares.
(iii) Calculate the maximum by which the rate of return on the portfolio of quoted shares could fall before
the after tax income generated would cease to exceed the return from renting out the house in
Higgsia.
Assume that the tax rules and rates for 2011/12 continue to apply in subsequent years.
【正确答案】Text references. Overseas aspects of capital gains tax are covered in Chapter 14. Overseas aspects of income are
dealt with in Chapter 10. Personal financial management is discussed in Chapter 31. Calculation of tax at the
marginal rate is covered in Chapter 1.
Top tips. In part (a), it is important to apply the general rules about the charge to capital gains tax for non-residents
to the specific assets.
Easy marks. The calculation of DTR in part (b)(i) was relatively straightforward because the examiner had stated
that the taxpayer had an amount of UK income which used up most of his basic rate band.
Examiner's comments. In part (a) candidates needed to be methodical and begin by pointing out that someone
who is neither resident nor ordinarily resident is not subject to capital gains tax on investments. It was then
necessary to relate this rule to Boson and to consider the applicability of the temporary non-residence rules. It was
important that candidates clearly addressed the specific assets in the question (the shares and the house) rather
than making general comments that could apply to anyone. This part of the question was done reasonably well
despite being quite tricky. The majority of candidates were aware of the temporary non-residence rules and some
good attempts were made to apply them. Two significant errors, which were relatively common, were to think that
the relevant period for the temporary non-residence rules is five years as opposed to five tax years and to suggest
that the remittance basis was also relevant to Boson. Candidates sitting the exam in the future should ensure that
they are confident of the detail of the rules and the situations in which the remittance basis applies.
The first part of part (b) was a straightforward calculation of income less income tax liability, incorporating double
tax relief, and was done well. Candidates who identified the remainder of the basic rate band after taking account of
the salary and the personal allowance were more likely to calculate the tax on the rental income (as opposed to the
tax on all of the individual's income) and were thus in a better position to satisfy the requirement correctly. Part (ii)
required a calculation of dividend income after deduction of all taxes. Again, this was a straightforward task, but
many candidates let themselves down by failing to address the basics of the UK tax system. In particular, the
dividend was often not grossed up and the tax credit was often omitted. Many candidates seem to find it difficult to
apply their basic knowledge when dealing with a single element of income as opposed to a full income tax
computation. Part (iii) required candidates to use the 25% effective rate of tax on dividends (for a higher rate
taxpayer) in order to calculate the amount by which the rate of return on a portfolio of shares could fall before the
after tax income generated would cease to exceed the return from renting out the overseas house. This was a
commercial, practical problem but was quite tricky and was not done well.
(a) Boson - capital gains tax position
Liability to capital gains tax
Boson will have been non-resident and non-ordinarily resident in the UK whilst living in Higgsia as he has
been abroad for more than three years. Accordingly, under general principles, he would not be subject to
capital gains tax on disposals made during that period.
However, there are special rules which apply to an individual who is a temporary non-resident. Boson will be
treated as a temporary non-resident if he returns to the UK on or before 5 April 2013. This is because he will
have been absent for less than five complete tax years and he was UK resident for four of the seven years
prior to leaving the UK. If he returns after 5 April 2013, these special rules will not apply because he will then
have been absent for five complete tax years (2008/09 to 2012/13 inclusive).
If Boson returns as planned on 20 January 2013, as a temporary non-resident, any capital gains he made
during the non-resident period on assets owned at the time he left the UK will be subject to capital gains tax
in the year of return (2012/13). Gains on assets purchased in the non-resident period do not come within the
temporary non-residence rules.
Boson will become UK resident and ordinarily resident from the date he returns to the UK as he is returning
permanently. He will then be subject to capital gains tax on his worldwide assets.
Sale of the shares in Meson plc on 1 May 2008 and 1 November2012
Boson owned the shares at the time he left the UK. Accordingly, Boson should delay his return to the UK
until after 5 April 2013 in order to avoid the temporary non-residence rules. The disposals will then not be
subject to capital gains tax.
Sale of the house in Higgsia
Boson purchased the house after leaving the UK. Accordingly, the disposal will not fall within the temporary
non-residence rules. Therefore, the disposal will not be subject to capital gains tax if Boson sells the house
in a tax year prior to his again becoming resident or ordinarily resident in the UK. So Boson should sell the
house in the tax year 2012/13 and again defer his return to the UK until after 5 April 2013.
(b) (i) Rental income after deduction of all taxes
￡ ￡
Rental income 11,000
Less: Higgsian income tax
￡11,000 × 30% 3,300
UK income tax
(￡7,275 (W) × 20%) + (￡3,725 × 40%) 2,945
6,245
Less: DTR (lower of Higgsian/UK tax) (2,945) (3,300)
Income after deduction of all taxes 7,700
Working
￡
Basic rate band 35,000
Less: salary ￡(35,200 - 7,475) (27,725)
Remaining basic rate band 7,275
(ii) Dividend income after deduction of all taxes
￡
Dividends generated ￡200,000 × 4.3% 8,600
Less: UK income tax (W) (513)
Income after deduction of all taxes 8,087
Working
Gross divided income
￡9,556
￡(9,556 - 7,275) = ￡2,281 × 22￡% ￡513
Tutorial note
As only some of the dividend is taxable at the higher rate it is not possible to calculate the tax due on
the dividend as simply the net dividend × 25%.
(iii) Maximum fall in rate of return
￡
Net income from dividends 8,087
Less: net income from rental (7,700)
Maximum fall in net dividend income 387
This represents gross dividend income of
573
because all this income is taxed at the higher rate (
for dividends).
Therefore dividends received would be
516
(Alternatively, the effective tax rate (because all this income is taxed at the
higher rate) is 25% so ￡387 × 100/75 = ￡516.)
So the minimum dividends to be received to equal rental income will be
￡(8,600 - 516) 8,084
Yield to produce this dividend income is
dealt with in Chapter 10. Personal financial management is discussed in Chapter 31. Calculation of tax at the
marginal rate is covered in Chapter 1.
Top tips. In part (a), it is important to apply the general rules about the charge to capital gains tax for non-residents
to the specific assets.
Easy marks. The calculation of DTR in part (b)(i) was relatively straightforward because the examiner had stated
that the taxpayer had an amount of UK income which used up most of his basic rate band.
Examiner's comments. In part (a) candidates needed to be methodical and begin by pointing out that someone
who is neither resident nor ordinarily resident is not subject to capital gains tax on investments. It was then
necessary to relate this rule to Boson and to consider the applicability of the temporary non-residence rules. It was
important that candidates clearly addressed the specific assets in the question (the shares and the house) rather
than making general comments that could apply to anyone. This part of the question was done reasonably well
despite being quite tricky. The majority of candidates were aware of the temporary non-residence rules and some
good attempts were made to apply them. Two significant errors, which were relatively common, were to think that
the relevant period for the temporary non-residence rules is five years as opposed to five tax years and to suggest
that the remittance basis was also relevant to Boson. Candidates sitting the exam in the future should ensure that
they are confident of the detail of the rules and the situations in which the remittance basis applies.
The first part of part (b) was a straightforward calculation of income less income tax liability, incorporating double
tax relief, and was done well. Candidates who identified the remainder of the basic rate band after taking account of
the salary and the personal allowance were more likely to calculate the tax on the rental income (as opposed to the
tax on all of the individual's income) and were thus in a better position to satisfy the requirement correctly. Part (ii)
required a calculation of dividend income after deduction of all taxes. Again, this was a straightforward task, but
many candidates let themselves down by failing to address the basics of the UK tax system. In particular, the
dividend was often not grossed up and the tax credit was often omitted. Many candidates seem to find it difficult to
apply their basic knowledge when dealing with a single element of income as opposed to a full income tax
computation. Part (iii) required candidates to use the 25% effective rate of tax on dividends (for a higher rate
taxpayer) in order to calculate the amount by which the rate of return on a portfolio of shares could fall before the
after tax income generated would cease to exceed the return from renting out the overseas house. This was a
commercial, practical problem but was quite tricky and was not done well.
(a) Boson - capital gains tax position
Liability to capital gains tax
Boson will have been non-resident and non-ordinarily resident in the UK whilst living in Higgsia as he has
been abroad for more than three years. Accordingly, under general principles, he would not be subject to
capital gains tax on disposals made during that period.
However, there are special rules which apply to an individual who is a temporary non-resident. Boson will be
treated as a temporary non-resident if he returns to the UK on or before 5 April 2013. This is because he will
have been absent for less than five complete tax years and he was UK resident for four of the seven years
prior to leaving the UK. If he returns after 5 April 2013, these special rules will not apply because he will then
have been absent for five complete tax years (2008/09 to 2012/13 inclusive).
If Boson returns as planned on 20 January 2013, as a temporary non-resident, any capital gains he made
during the non-resident period on assets owned at the time he left the UK will be subject to capital gains tax
in the year of return (2012/13). Gains on assets purchased in the non-resident period do not come within the
temporary non-residence rules.
Boson will become UK resident and ordinarily resident from the date he returns to the UK as he is returning
permanently. He will then be subject to capital gains tax on his worldwide assets.
Sale of the shares in Meson plc on 1 May 2008 and 1 November2012
Boson owned the shares at the time he left the UK. Accordingly, Boson should delay his return to the UK
until after 5 April 2013 in order to avoid the temporary non-residence rules. The disposals will then not be
subject to capital gains tax.
Sale of the house in Higgsia
Boson purchased the house after leaving the UK. Accordingly, the disposal will not fall within the temporary
non-residence rules. Therefore, the disposal will not be subject to capital gains tax if Boson sells the house
in a tax year prior to his again becoming resident or ordinarily resident in the UK. So Boson should sell the
house in the tax year 2012/13 and again defer his return to the UK until after 5 April 2013.
(b) (i) Rental income after deduction of all taxes
￡ ￡
Rental income 11,000
Less: Higgsian income tax
￡11,000 × 30% 3,300
UK income tax
(￡7,275 (W) × 20%) + (￡3,725 × 40%) 2,945
6,245
Less: DTR (lower of Higgsian/UK tax) (2,945) (3,300)
Income after deduction of all taxes 7,700
Working
￡
Basic rate band 35,000
Less: salary ￡(35,200 - 7,475) (27,725)
Remaining basic rate band 7,275
(ii) Dividend income after deduction of all taxes
￡
Dividends generated ￡200,000 × 4.3% 8,600
Less: UK income tax (W) (513)
Income after deduction of all taxes 8,087
Working
Gross divided income
￡9,556￡(9,556 - 7,275) = ￡2,281 × 22￡% ￡513
Tutorial note
As only some of the dividend is taxable at the higher rate it is not possible to calculate the tax due on
the dividend as simply the net dividend × 25%.
(iii) Maximum fall in rate of return
￡
Net income from dividends 8,087
Less: net income from rental (7,700)
Maximum fall in net dividend income 387
This represents gross dividend income of
573because all this income is taxed at the higher rate (
for dividends).Therefore dividends received would be
516(Alternatively, the effective tax rate (because all this income is taxed at the
higher rate) is 25% so ￡387 × 100/75 = ￡516.)
So the minimum dividends to be received to equal rental income will be
￡(8,600 - 516) 8,084
Yield to produce this dividend income is
【答案解析】