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)

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