(b) Given his recent diagnosis, advise Stuart as to which of the two proposed investments (Omikron plc/Omegaplc) would be the more tax efficient alternative. Give reasons for your choice. (3 marks)
(b) Given his recent diagnosis, advise Stuart as to which of the two proposed investments (Omikron plc/Omega
plc) would be the more tax efficient alternative. Give reasons for your choice. (3 marks)
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(c) (i) State the date by which Thai Curry Ltd’s self-assessment corporation tax return for the year ended30 September 2005 should be submitted, and advise the company of the penalties that will be due ifthe return is not submitted until 31 May 2007. (3 marks)(ii) State the date by which Thai Curry Ltd’s corporation tax liability for the year ended 30 September 2005should be paid, and advise the company of the interest that will be due if the liability is not paid until31 May 2007. (3 marks)
(c) Assuming that Stuart:(i) purchased 201,000 shares in Omega plc on 3 December 2005; and(ii) dies on 20 December 2007,calculate the potential inheritance tax (IHT) liability which would arise if Rebecca were to die on 1 March2008, and no further tax planning measures were taken.Assume that all asset values remain unchanged and that the current rates of inheritance tax continue toapply. (6 marks)
(d) Advise on any lifetime inheritance tax (IHT) planning that could be undertaken in respect of both Stuart andRebecca to help reduce the potential inheritance tax (IHT) liability calculated in (c) above. (7 marks)Relevant retail price index figures are:May 1994 144·7April 1998 162·6
(b) Explain the capital gains tax (CGT) and inheritance tax (IHT) implications of Graeme gifting his remaining ‘T’ordinary shares at their current value either:(i) to his wife, Catherine; or(ii) to his son, Barry.Your answer should be supported by relevant calculations and clearly identify the availability and effect ofany reliefs (other than the CGT annual exemption) that might be used to reduce or defer any tax liabilitiesarising. (9 marks)
(b) Assuming that the income from the sale of the books is not treated as trading income, calculate Bob’s taxableincome and gains for all relevant tax years, using any loss reliefs in the most tax-efficient manner. Youranswer should include an explanation of the loss reliefs available and your reasons for using (or not using)them. (12 marks)Assume that the rates and allowances for 2004/05 apply throughout this part of the question.
(c) Advise Alan on the proposed disposal of the shares in Mobile Ltd. Your answer should include calculationsof the potential capital gain, and explain any options available to Alan to reduce this tax liability. (7 marks)
(b) Mabel has two objectives when making the gifts to Bruce and Padma:(1) To pay no tax on any gift in her lifetime; and(2) To reduce the eventual liability to inheritance tax on her death.Advise Mabel which item to gift to Bruce and to Padma in order to satisfy her objectives. Give reasons foryour advice.Your advice should include a computation of the inheritance tax saved as a result of the two gifts, on theassumption that Mabel dies on 30 June 2011. (10 marks)
(b) (i) Advise Benny of the income tax implications of the grant and exercise of the share options in SummerGlow plc on the assumption that the share price on 1 September 2007 and on the day he exercises theoptions is ￡3·35 per share. Explain why the share option scheme is not free from risk by reference tothe rules of the scheme and the circumstances surrounding the company. (4 marks)
(c) Outline the ways in which Arthur and Cindy can reduce their income tax liability by investing in unquotedshares and recommend, with reasons, which form. of investment best suits their circumstances. You are notrequired to discuss the qualifying conditions applicable to the investment vehicle recommended. (5 marks)You should assume that the income tax rates and allowances for the tax year 2005/06 apply throughout thisquestion
(ii) Explain, with reasons, the relief available in respect of the fall in value of the shares in All Over plc,identify the years in which it can be claimed and state the time limit for submitting the claim.(3 marks)
(c) Prepare brief notes for the proposed meeting with Charles and Jane. Clearly identify the further informationyou would need in order to advise them more fully and suggest appropriate personal financial planningprotection products, in respect of both death and serious illness. (9 marks)You should assume that the income tax rates and allowances for the tax year 2005/06 and the corporation taxrates for the financial year 2005 apply throughout this question.
(ii) Assuming the relief in (i) is available, advise Sharon on the maximum amount of cash she could receiveon incorporation, without triggering a capital gains tax (CGT) liability. (3 marks)
(ii) Calculate Paul’s tax liability if he exercises the share options in Memphis plc and subsequently sells theshares in Memphis plc immediately, as proposed, and show how he may reduce this tax liability.(4 marks)
(c) For commercial reasons, Damian believes that it would be sensible to place a new holding company, Bold plc,over the existing company, Linden Limited. Bold plc would also be unquoted and would acquire the existingLinden Limited shares in exchange for the issue of its own shares.If the new structure is implemented, Bold plc will provide management services to Linden Limited, but theamount that will be charged for these services is yet to be determined.Required:(i) State the capital gains tax (CGT) issues that Damian should be aware of before disposing of his sharesin Linden Limited to Bold plc. Your answer should include details of any conditions that will need to besatisfied if an immediate charge to tax is to be avoided. (4 marks)
(ii) Following on from your answer to (i), evaluate the two purchase proposals, and advise Bill and Benwhich course of action will result in the highest amount of after tax cash being received by theshareholders if the disposal takes place on 31 March 2006. (4 marks)
(b) Advise on the capital gains implications should Trent Limited’s old building be sold as proposed. Support youradvice with relevant calculations. (4 marks)
(ii) Advise Andrew of the tax implications arising from the disposal of the 7% Government Stock, clearlyidentifying the tax year in which any liability will arise and how it will be paid. (3 marks)
(b) (i) Advise Andrew of the income tax (IT) and capital gains tax (CGT) reliefs available on his investment inthe ordinary share capital of Scalar Limited, together with any conditions which need to be satisfied.Your answer should clearly identify any steps that should be taken by Andrew and the other investorsto obtain the maximum relief. (13 marks)
(ii) Advise Clifford of the capital gains tax implications of the alternative of selling the Oxford house andgarden by means of two separate disposals as proposed. Calculations are not required for this part ofthe question. (3 marks)
(ii) Advise Mr Fencer of the income tax implications of the proposed financing arrangements. (2 marks)
(b) Advise Sergio on the appropriateness of investing in a domestic rental property in view of his personalcircumstances and recommend suitable alternative investments giving reasons for your advice. (4 marks)
(ii) A proposal which will increase the after tax proceeds from the sale of the Snapper plc loan stock and areasoned recommendation of a more appropriate form. of external finance. (3 marks)
(c) The inheritance tax payable by Adam in respect of the gift from his aunt. (4 marks)Additional marks will be awarded for the appropriateness of the format and presentation of the memorandum andthe effectiveness with which the information is communicated. (2 marks)Note: you should assume that the tax rates and allowances for the tax year 2006/07 will continue to apply for theforeseeable future.
(b) State the immediate tax implications of the proposed gift of the share portfolio to Avril and identify analternative strategy that would achieve Crusoe’s objectives whilst avoiding a possible tax liability in thefuture. State any deadline(s) in connection with your proposed strategy. (5 marks)
(b) Advise Maureen on deregistration for the purposes of value added tax (VAT) and any possible alternativestrategy. (8 marks)An additional mark will be awarded for the effectiveness with which the information is communicated.(1 mark)
1 Stuart is a self-employed business consultant aged 58. He is married to Rebecca, aged 55. They have one child,Sam, who is aged 24 and single.In November 2005 Stuart sold a house in Plymouth for ￡422,100. Stuart had inherited the house on the death ofhis mother on 1 May 1994 when it had a probate value of ￡185,000. The subsequent pattern of occupation was asfollows:1 May 1994 to 28 February 1995 occupied by Stuart and Rebecca as main residence1 March 1995 to 31 December 1998 unoccupied1 January 1999 to 31 March 2001 let out (unfurnished)1 April 2001 to 30 November 2001 occupied by Stuart and Rebecca1 December 2001 to 30 November 2005 used occasionally as second homeBoth Stuart and Rebecca had lived in London from March 1995 onwards. On 1 March 2001 Stuart and Rebeccabought a house in London in their joint names. On 1 January 2002 they elected for their London house to be theirprincipal private residence with effect from that date, up until that point the Plymouth property had been their principalprivate residence.No other capital disposals were made by Stuart in the tax year 2005/06. He has ￡29,500 of capital losses broughtforward from previous years.Stuart intends to invest the gross sale proceeds from the sale of the Plymouth house, and is considering twoinvestment options, both of which he believes will provide equal risk and returns. These are as follows:(1) acquiring shares in Omikron plc; or(2) acquiring further shares in Omega plc.Notes:1. Omikron plc is a listed UK trading company, with 50,250,000 shares in issue. Its shares currently trade at 42pper share.2. Stuart and Rebecca helped start up the company, which was then Omega Ltd. The company was formed on1 June 1990, when they each bought 24,000 shares for ￡1 per share. The company became listed on 1 May1997. On this date their holding was subdivided, with each of them receiving 100 shares in Omega plc for eachshare held in Omega Ltd. The issued share capital of Omega plc is currently 10,000,000 shares. The share priceis quoted at 208p – 216p with marked bargains at 207p, 211p, and 215p.Stuart and Rebecca’s assets (following the sale of the Plymouth house but before any investment of the proceeds) areas follows:Assets Stuart Rebecca￡ ￡Family house in London 450,000 450,000Cash from property sale 422,100 –Cash deposits 165,000 165,000Portfolio of quoted investments – 250,000Shares in Omega plc see above see aboveLife insurance policy note 1 note 1Note:1. The life insurance policy will pay out a sum of ￡200,000 on the death of the first spouse to die.Stuart has recently been diagnosed with a serious illness. He is expected to live for another two or three years only.He is concerned about the possible inheritance tax that will arise on his death. Both he and Rebecca have wills whoseterms transfer all assets to the surviving spouse. Rebecca is in good health.Neither Stuart nor Rebecca has made any previous chargeable lifetime transfers for the purposes of inheritance tax.Required:(a) Calculate the taxable capital gain on the sale of the Plymouth house in November 2005 (9 marks)