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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.

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问答题An extract from an e-mail from your manager following a meeting he has had with Charleston Dance is set out below. I attach a memorandum summarising the matters discussed in a meeting I had yesterday with Charleston. I also attach a calculation of the inheritance tax due on his father's death as prepared by his friend, Lindy. I have not had the chance to look at this in detail but I can confirm that the annual exemptions and the taper relief have been applied correctly and that there are no arithmetical errors; please review it with care. I want you to write a letter from me to Charleston covering the following issues. (i) Inheritance tax - Brief explanations of any errors you find when you review Lindy's calculation of the inheritance tax due on Charleston's father's death and the effect of correcting the errors on the total inheritance tax due. (ii) Investments and pensions - The suitability of investing in venture capital trusts and a summary of the tax reliefs available in respect of such an investment. - The maximum tax allowable pension contributions that can be made by Charleston and Betty and the effect on this, if any, of purchasing further rental properties. (iii) Income tax planning - Calculations, with supporting explanations to show that the total tax payable would increase (rather than decrease!) if he were to transfer all of the quoted shares and government stocks to a company wholly owned by him. Use the income figures from Lindy's inheritance tax calculation for these purposes and assume that the whole of the new company's post-tax income would be paid as a dividend to Charleston. - The income tax advantages of Charleston transferring investments to Betty or their children. - The points that Charleston needs to be aware of in connection with tax avoidance schemes and the taxation of the Balboan properties. Thank you The memorandum prepared by your manager is set out below. To The files From Tax manager Date 29 May 2012 Subject Charleston Dance I met Charleston and his wife Betty on 28 May 2012. The couple have two children who are both at university. Charleston's father died on 1 April 2012 leaving Charleston the whole of his estate. Charleston and Betty immediately resigned from their jobs and now have no income other than that generated from Charleston's inherited investments. Charleston agreed to send me a schedule of the assets he inherited from his father together with a calculation that a friend of his, Lindy, has done of the inheritance tax due. The schedule will also include details of gifts made by his father whilst he was alive and the income generated by the inherited investments. Charleston has asked me to comment on the following ideas. Charleston's investment ideas 1 Charleston and Betty intend to make the maximum possible tax allowable personal pension contributions. 2 Charleston will sell his father's home and invest much of the proceeds in further rental property situated either in the UK or in the country of Balboa, which is not in the European Economic Area (EEA). 3 Charleston wants to invest in unquoted trading companies but does not want to invest in enterprise investment scheme shares due to the level of risk involved. Charleston's tax planning ideas 1 Lindy has convinced him that he would save income tax if he formed a company and transferred the quoted shares and government stocks inherited from his father into it. Charleston would own the whole of the company. 2 A London based financial institution has sent Charleston details of a number of tax avoidance schemes that they are promoting. Lindy has assured Charleston that there is no need to disclose the income from the Balboan properties to HM Revenue and Customs (HMRC) because the income is taxed in the country of Balboa. Charleston is concerned about the legality of the tax avoidance schemes and the accuracy of Lindy's suggestion. Our input I told Charleston that I would suggest an alternative to enterprise investment scheme shares as well as other tax planning opportunities. I also suggested that it may be possible to increase his tax allowable pension contributions depending on the property he buys. Charleston, Betty and the children are resident, ordinarily resident and domiciled in the UK. Charleston's father was also resident, ordinarily resident and domiciled in the UK. Tax manager Lindy's calculation of the inheritance tax due and the income generated by the inherited investments is set out below. Inheritance tax computation Father's lifetime gifts ￡ ￡ 1 November 2002 - Gift of cash to Charleston - more than seven years 200,000 prior to death 1 July 2005 - Gift of cash to Charleston 370,000 Annual exemptions (6,000) 364,000 Nil band 325,000 Gifts in last seven years (￡200,000 - ￡6,000 (Two annual exemptions)) (194,000) (131,000) 233,000 Inheritance tax at 40% 93,200 Taper relief (￡93,200×80%) (74,560) 18,640 Father's death estate Annual income received ￡ ￡ ￡ UK assets: Father's home 1,300,000 UK quoted shares and related dividends 500,000 21,000 UK Government stocks and related interest 600,000 27,000 Bank accounts and related interest, furniture 410,000 8,000 and paintings Cars 34,000 Investment properties in the country of Balboa and 800,000 72,000 related rental income Less: Balboan inheritance tax (160,000) 640,000 Chargeable estate 3,484,000 Inheritance tax at 40% (no nil band available) 1,393,600 Total tax due (￡18,640 + ￡1,393,600) 1,412,240 Required Prepare the letter requested in the e-mail from your manager. Marks are available for the three sections of the letter as follows: (i) Inheritance tax; (ii) Investments and pensions; (iii) Income tax planning. Professional marks will be awarded for the appropriateness of the format and presentation of the letter and the effectiveness with which the information is communicated. Assume that the tax rules and rates for 2011/12 continue to apply in subsequent years.

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