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问答题An extract from an e-mail from your manager detailing two tasks for you to perform is set out below. (a) You will find a letter on your desk from a new client, Grifter, who is a self-employed information technology consultant. I need you to write a memorandum for the files addressing the matters regarding Grifter set out below. You should include a brief explanation of any tax liabilities that can be deferred but, other than this, keep any narrative to a minimum unless I have specifically asked for it. (i) Property in the country of Shadowsia Calculate the income tax on the rental income in respect of the property in Shadowsia on the basis that Grifter is a higher rate taxpayer for all of the relevant years. Grifter has asked us to assume that there will be interest and penalties payable equal to 100% of the tax due. There is no double tax treaty between the UK and the country of Shadowsia. Unfortunately, Grifter's uncle died in November of this year so you will need to include a calculation of Grifter's inheritance tax liability, after any available reliefs, on the gift of the property. Grifter has informed me that his uncle was domiciled in the UK and that, due to gifts made in February 2007, there is no annual exemption or nil rate band available in respect of the gift. There was no inheritance tax liability in Shadowsia in respect of the property. You should also include your assessment of Grifter's view of the tax repayment he has received. (ii) Reduction in mortgage Calculate the amount by which Grifter could reduce his mortgage if he were to sell the cars. This will be the after tax proceeds from the sale of the cars less any amounts due under (i) above. Please include a detailed explanation of your tax treatment of the sale of the cars based on our knowledge of Grifter's circumstances. I understand from Grifter that he has not previously sold any cars from his collection. Calculate the maximum price that Grifter could pay for a new house if he were to sell his existing house. Assume that his existing house will be sold on 28 February 2013 for ￡1,200,000 and that there will be professional fees of ￡6,400. In calculating the amount available to buy a new house you should assume that Grifter will reduce his mortgage by the same amount as the figure you have computed in respect of the sale of the cars and that there will be professional fees in respect of the purchase of the new house of ￡4,000. When carrying out these calculations you should assume that Grifter's capital gains tax annual exempt amount is not available and that he is a higher rate taxpayer. (b) I want you to write a briefing note on the remittance basis of taxation for individuals in respect of both investment income and capital gains￡ The note will be sent to all of our staff to provide them with a summary of the basic rules so that they will know when there is a need to consider the matter in more detail. I suggest you use the following headings: - Who is entitled to be taxed on the remittance basis? - Is a claim required? - How does the remittance basis affect an individual's UK tax liability? Thanks Bob The letter from Grifter is set out below. 1 Dark Lane London Mr B Mitchum M (ii) Reduction in mortgage. Professional marks will be added in part (a) for the appropriateness of the format and presentation of the memorandum and the effectiveness with which the information is communicated. (b) Prepare the briefing note on the remittance basis of taxation for individuals are requested by your manager in his e-mail. You should assume that the tax rates and allowances for the tax year 2011/12 will continue to apply for the foreseeable future.

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问答题Your manager has had a meeting with Benny Fitt, the managing director of Usine Ltd, and has sent you a copy of the following memorandum. To The files From Tax manager Date 20 December 2011 Subject Usine Ltd (a) Provision of employment benefits to Benny Fitt (BF) Petrol company car Provided on 1 October 2011. Car has list price of ￡28,400 and CO2 emission figure of 212g/kin. Sun-roof has been added costing ￡700. BF made a capital contribution of ￡2,500 towards the cost of the car. Company credit card During 2011/12 this will be used to pay for: · motor repairs ￡460 · business accommodation ￡380 · customer entertaining ￡720 · petrol ￡425 Included in the figure for petrol is ￡180 in respect of private mileage which is not reimbursed to Usine Ltd. Lap top computer Cost ￡3,000. Provided on 6 April 2011, for private use and occasional business use. (b) Sales director changes On 10 December 2011 Usine Ltd dismissed their sales director and paid him a lump sum redundancy payment of ￡45,000. This consisted of the following. ￡ Statutory redundancy pay 2,100 Payment in lieu of notice 3,100 Holiday pay 2,800 Ex gratia compensation for loss of office 34,000 Agreement not to work for a rival company 3,000 45,000 A new sales director is to commence employment on 1 January 2012. She is to be paid a lump sum payment of ￡10,000 upon the commencement of employment. The new director currently lives 120 miles from Usine Ltd's head office, so the company has offered her two alternative arrangements. (i) Usine Ltd will pay ￡9,500 towards the cost of the director's relocation, and will also provide an interest free loan of ￡50,000 in order for the director to purchase a property. (ii) Usine Ltd will provide accommodation for the director. The company owns a house which has an annual value of ￡4,400, is currently valued at ￡99,000, and has recently been furnished at a cost of ￡10,400. Usine Ltd will pay for the annual running costs of ￡3,200. (c) Company Share Option Plan The company is considering setting up a Company Share Option Plan for certain senior employees and directors. Options will be granted to these individuals that will be exercisable between three and ten years after the grant. An extract from an email from your manager is set out below. Please prepare a letter to Benny Fitt setting out the following: 1 Employment benefits Advise both Benny Fitt and Usine Ltd of the tax implications arising from the provision of the company car, the credit card and the laptop computer. Explain why it would be beneficial if Benny paid Usine Ltd ￡180 for his private petrol. You can ignore the VAT implications. Sales director changes Explain the income tax implications of the lump sum payments of ￡45,000 and ￡10,000. Explain the income tax implications of the two alternative arrangements offered to the new sales director. You do not need to consider the tax implications for Usine Ltd and you should confine your statements to the implications for 2011/12. Share option scheme Outline the conditions required for the scheme to obtain HMRC approval. You have extracted the following further information from client files. · Usine Ltd is an unquoted trading company. · Benny Fitt is aged 39 and is paid a salary of ￡45,000 per annum. · Usine Ltd purchased the house available to the new sales director in 1998 for ￡86,000. It was improved at a cost of ￡8,000 during 2007. Required Prepare the letter requested by your manager. Marks are available for the components of the letter as follows: 1 Tax treatment of the employment benefits for Benny Fitt and Usine Ltd. 2 Tax implications of the payments (and benefits) provided to the two sales directors. 3 The conditions for the share option scheme to be approved. Appropriateness of the format and presentation of the letter and the effectiveness with which its content is communicated. You may assume that the rates and allowances for the 2011/12 tax year and Financial Year 2011 continue to apply for the foreseeable future.

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问答题Your manager has had a meeting with Pilar Mareno, a self-employed consultant, and has sent you a copy of the following memorandum. To The files From Tax manager Date 31 May 2012 Subject Pilar Mareno-Business expansion Pilar Mareno (PM) has been offered a contract with DWM plc, initially for two years, which will result in fees of ￡80,000 plus VAT per annum. In order to service this contract, PM would have to take on additional help in the form of either a part-time employee for two days a week, or the services of a self-employed contractor for 100 days per year. She would also have to acquire a van, which would be used wholly for business purposes. PM has decided that she will only enter into the contract if it generates at least an additional ￡15,000 per annum, on average, for the family after all costs and taxes. PM's annual profitability and the profit generated by the contract (before taking into account the costs of the part- time employee/contractor and the van) are summarised below. Existing New business contract ￡ ￡ Sales 210,000 80,000 Less: Materials, wages and overheads (120,000) (35,000) Profit per accounts and taxable profit 90,000 45,000 Supplies made under the contract will be 65% standard rated and 35% exempt for value added tax (VAT) purposes; this is the same as for PM's existing business. ￡31,500 of the costs incurred in relation to the contract will be subject to VAT at the standard rate. The equivalent figure for PM's existing business is ￡100,000. PM has identified Max Wallen (MW) as a possible self-employed contractor. MW would charge ￡70 per day plus VAT for a contract of 100 days per year, with a rate of ￡20 per day plus VAT in respect of any days when he is ill (up to a maximum of eight days per year). PM has a spare copy of the specialist software that MW would need but MW would use his own laptop computer. Alternatively, PM could employ her husband, Alec (AM), paying him a gross annual salary of ￡7,600. AM would have to give up his current full-time job, but would expect to do other part-time employed work earning a further ￡10,000 (gross) per annum. PM estimates that a second hand van will cost ￡7,800 plus VAT or alternatively, a van could be leased for ￡300 plus VAT per month. We can assume that if the van is purchased, it will be sold at the end of the two-year contract for ￡2,500 plus VAT. Tax manager An extract from an email from your manager is set out below. Please prepare a memorandum for me, incorporating the following: 1 Calculations to demonstrate whether or not Pilar's desired annual after tax income from the new contract will be achievable depending on: · whether she leases or buys the van; and · whether she employs Alec or uses Max Wallen. You may find it easier to: (i) work out the after tax cost of buying or leasing the van. (When calculating the annual cost of the van, assume that the total cost can be averaged over the two years of the contract.) and then to consider: (ii) the after tax income depending on whether Alec is employed or the self-employed contractor, Max, is used. 2 A rationale for the approach you have taken and a summary of your findings. 3 Any other issues we should be considering in respect of Pilar employing Alec, including any alternative to employment. 4 It seems to me that HM Revenue and Customs may be able to successfully contend that Max Wallen would be an employee, rather than a self-employed contractor. Prepare your figures on the basis that he is self- employed but include a list of factors in your memorandum, based on the information we have, that would indicate either employed or self-employed status. Take some time to think about your approach to this before you start. Also, as always when working on Pilar's affairs, watch out for the VAT as it can get quite tricky. I suspect the VAT will affect the costs incurred so you'll need to address VAT first. Pilar's estimate of the profit on the contract will have ignored these complications. Tax manager You have extracted the following further information from Pilar Mareno's client file. · None of Pilar's VAT inputs is directly attributable to either standard rated or exempt supplies. · Alec has worked for a UK bank for many years and is currently paid an annual salary of ￡17,000. · The couple have no sources of income other than those set out above. Required Prepare the memorandum requested by your manager. Marks are available for the four components of the memorandum as follows: (1) Relevant calculations. (2) Rationale for the approach taken and summary of findings. (3) Other issues in respect of Pilar employing Alec, together with any suggestions as to an alternative to employment. (4) The employment status of Max Wallen. Appropriateness of the format and presentation of the memorandum and the effectiveness with which the information is communicated. You may assume that the rates and allowances for the tax year 2011/12 will continue to apply for the foreseeable future.

问答题Ernest intends to sell a capital asset on 1 February 2013 and wishes to maximise his after tax sales proceeds He is also seeking advice on his inheritance tax position and on his will. The following information has been obtained from a telephone conversation with Ernest and from client files. Ernest: - Is 54 years old and unmarried. - Lives with Georgina, who is 48 years old, and her adult daughter, Eileen. - Earns a salary of ￡130,000 per year. - Has as yet made no disposals of capital assets in the tax year 2012/13. - Intends to sell either an oil painting or 7,700 shares in Neutron Ltd on 1 February 2013 Oil painting: - Ernest inherited the painting on the death of his uncle on 1 May 2007 when it was worth ￡23,300. - Ernest's uncle purchased the painting on 1 July 1993 for ￡19,500. - The painting is expected to be worth ￡47,000 on 1 February 2013. Shares in Neutron Ltd: - Qualified for income tax relief under the enterprise investment scheme (EIS) although Ernest did not claim any relief. - 1 April 2004 Ernest subscribed for 18,600 shares at ￡8.90 per share. - 1 March 2006 Ernest received a 1 for 4 bonus issue. - 1 July 2009 Ernest purchased his full entitlement under a 1 for 10 rights issue at ￡4.20 per share. - The shares are expected to be worth ￡5 each on 1 February 2013. Neutron Lid: - Has an issued share capital of two million ￡1 ordinary shares. - Is not quoted on any stock exchange. - Manufactures and distributes radiation measuring equipment. Inheritance tax planning and wills: - Neither Ernest nor Georgina have made any lifetime gifts. - In his will, Ernest has left the whole of his estate to Georgina. - In her will, Georgina has left the whole of her estate to Eileen. - Ernest and Georgina wish to minimise their total inheritance tax liability. - They are willing to make lifetime gifts to each other but not to Eileen or any other person or organisation. Current market values of assets owned: Ernest Georgina ￡ ￡ Family home 620,000 - Antiques and works of art 400,000 60,000 Investment property 380,000 - Shares in Neutron Ltd 127,875 - Required (a) Prepare calculations of the after tax sales proceeds that would be realised on the proposed sale of the painting and on the proposed sale of the shares on 1 February 2013. Note: you should assume that Ernest will make any necessary beneficial claims or elections. (b) Prepare brief notes explaining the inheritance tax liabilities that will arise on the deaths of Ernest and Georgina if no action is taken to reduce such liabilities; identify any actions that could be taken in order to reduce these liabilities and explain the inheritance tax and capital gains tax implications of these actions. Note: you are not required to prepare calculations for part (b) of this question. Assume that the tax rules and rates for 2011/12 continue to apply in subsequent years.

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