4 Healthfoods Ltd （HFL) is a well－established company which markets fruit and vegetables u

What is suggested as the best among all healthfoods？

A．Natural food.

B．Canned food.

C．Vitamin added food.

D．Organic food.

(c) Calculate the expected corporation tax liability of Dovedale Ltd for the year ending 31 March 2007 on the

assumption that all available reliefs are claimed by Dovedale Ltd but that Hira Ltd will not claim any capital

allowances in that year. (4 marks)

A.Between 1 and 2 years

B.Between 3 and 4 years

C.Between 4 and 5 years

D.Between 5 and 6 years

4 Diverse Holdings Plc has five wholly-owned subsidiary companies. These are:

(i) Organic Foods Ltd (OFL) which is involved in the production and sale of organically grown fruit and vegetables.

OFL has built up a very good reputation as a supplier of quality produce.

(ii) Haul-Trans Ltd (HTL) which was acquired on 1 December 2005 and is involved in transporting a range of

products on behalf of third parties.

(iii) Kitchen Appliances Ltd (KAL) which is involved in the manufacture and sale of small, manually-operated kitchen

appliances. KAL has recently suffered from squeezed margins as a consequence of competition from low cost

imports.

(iv) Paper Supplies Ltd (PSL) which manufactures and sells a narrow range of stationery products to two distributors.

(v) Office Products Ltd (OPL) which manufactures and sells computer workstations with unique design features

which are highly regarded by health and safety experts.

The management accountant of Diverse Holdings Plc has gathered the following actual and forecast information

relating to the five subsidiaries:

Required:

(a) Identify and comment on FOUR advantages that may be gained as a result of the adoption of a formal system

of strategic planning. (4 marks)

(ii) Analyse the effect of delaying the sale of the business of the Stiletto Partnership to Razor Ltd until

30 April 2007 on Clint’s income tax and national insurance position.

You are not required to prepare detailed calculations of his income tax or national insurance liabilities.

(4 marks)

(ii) Briefly outline the tax consequences for Henry if the types of protection identified in (i) were to be

provided for him by Happy Home Ltd compared to providing them for himself. You are not required to

discuss the corporation tax (CT) consequences for Happy Home Ltd. (4 marks)

ria. Maria wants advice on the tax consequences of selling some of her shares back to Granada Ltd. Granada Ltd wants advice on the corporation tax and value added tax (VAT) implications of the recent acquisition of an unincorporated business.

Maria:

– Is resident and domiciled in the UK.

– Is a higher rate taxpayer and will remain so in the future.

– Has already realised chargeable gains of ￡15,000 in the tax year 2015/16.

Shares in Granada Ltd:

– Maria subscribed for 10,000 ￡1 ordinary shares in Granada Ltd at par in June 2006.

– Maria is one of four equal shareholders and directors of Granada Ltd.

– Maria intends to sell either 2,700 or 3,200 shares back to the company on 31 March 2016 at their current market value of ￡12·80 per share.

– All of the conditions for capital treatment are satisfied, except for, potentially, the condition relating to the reduction in the level of shareholding.

Granada Ltd:

– Is a UK resident trading company which manufactures knitwear.

– Prepares accounts to 31 December each year.

– Is registered for VAT.

– Acquired the trade and assets of an unincorporated business, Starling Partners, on 1 January 2016.

Starling Partners:

– Had been trading as a partnership for many years as a wholesaler of handbags within the UK.

– Starling Partners’ main assets comprise a freehold commercial building and its ‘Starling’ brand, which were valued on acquisition by Granada Ltd at ￡105,000 and ￡40,000 respectively.

– Is registered for VAT.

– The transfer of its trade and assets to Granada Ltd qualified as a transfer of a going concern (TOGC) for VAT purposes.

– The business is forecast to make a trading loss of ￡130,000 in the year ended 31 December 2016.

Granada Ltd – results and proposed expansion:

– The knitwear business is expected to continue making a taxable trading profit of around ￡100,000 each year.

– Granada Ltd has no non-trading income but realised a chargeable gain of ￡10,000 on 1 March 2016.

– Granada Ltd is considering expanding the wholesale handbag trade acquired from Starling Partners into the export market from 1 January 2017.

– Granada Ltd anticipates that this expansion will result in the wholesale handbag trade returning a profit of ￡15,000 in the year ended 31 December 2017.

Required:

(a) (i) Explain, with the aid of calculations, why the capital treatment WILL NOT apply if Maria sells 2,700 of her shares back to Granada Ltd, but WILL apply if, alternatively, she sells back 3,200 shares. (4 marks)

(ii) Calculate Maria’s after-tax proceeds per share if she sells:

(1) 2,700 shares back to Granada Ltd; and alternatively

(2) 3,200 shares back to Granada Ltd. (4 marks)

(b) (i) Describe the corporation tax treatment of the acquisition of the ‘Starling’ brand by Granada Ltd, if no charge for amortisation was required in its statement of profit or loss. (3 marks)

(ii) Discuss how Granada Ltd could obtain relief for the trading loss expected to be incurred by the trade acquired from Starling Partners, if it does not wish to carry any of the loss back. (5 marks)

(c) Explain the value added tax (VAT) implications for Granada Ltd in respect of the acquisition of the business of Starling Partners, and the additional information needed in relation to the building to fully clarify the VAT position. (4 marks)

(a) Phi Ltd is a company set up in Guangzhou. In 2014 Phi Ltd incurred the following expenses:

(1) A consultancy fee of RMB3,500 for services provided in China paid to Mr Xie, who is a China tax resident.

(2) A consultancy fee of RMB70,000 for services provided in China paid to Ms Ma, who is not a China tax resident.

(3) A royalty of RMB80,000 paid to Deji Ltd, which is a China tax resident enterprise.

(4) A royalty of RMB90,000 paid to Backa Ltd, which is not a China tax resident enterprise.

Required:

For each of the four payments, state whether Phi Ltd will be a withholding agent for income tax, and where Phi Ltd is the withholding agent, calculate the amount of income tax to be withheld.

Note: Ignore value added tax and business tax, and any tax incentives available under tax treaties. (7 marks)

(b) Jack has set up an e-shop selling goods via an internet platform. His total sales in 2014 were RMB400,000. He did not register with the tax authorities or pay any taxes in 2014. This was discovered by the tax bureaus in 2015.

Required:

State the possible consequences Jack may be exposed to under the Tax Collection and Administrative Law, as a result of his failure to comply with the tax registration and tax payment requirements. (3 marks)

2015, Tenth Ltd, a company owned by Mable, ceased trading. On 1 October 2015, Eleventh Ltd, another company owned by Mable, commenced trading. The following information is available:

Tenth Ltd

(1) For the final four-month period of trading ended 31 July 2015, Tenth Ltd had a tax adjusted trading profit of ￡52,400. This figure is before taking account of capital allowances.

(2) On 1 April 2015, the tax written down value of the company’s main pool was ￡12,400. On 3 June 2015, Tenth Ltd purchased a laptop computer for ￡1,800.

On 31 July 2015, the company sold all of the items included in the main pool at the start of the period for ￡28,200 and the laptop computer for ￡1,300. None of the items included in the main pool was sold for more than its original cost.

(3) On 31 July 2015, Tenth Ltd sold the company’s freehold office building for ￡180,300. The building was purchased on 3 May 2011 for ￡150,100, and its indexed cost on 31 July 2015 was ￡164,500.

(4) During the four-month period ended 31 July 2015, Tenth Ltd let out one floor of its freehold office building which was always surplus to requirements. The floor was rented at ￡1,200 per month, but the tenant left owing the rent for July 2015 which Tenth Ltd was unable to recover. The total running costs of the office building for the four-month period ended 31 July 2015 were ￡6,300, of which one-third related to the let floor. The other two-thirds of the running costs have been deducted in calculating Tenth Ltd’s tax-adjusted trading profit of ￡52,400.

(5) During the four-month period ended 31 July 2015, Tenth Ltd made qualifying charitable donations of ￡800.

Eleventh Ltd

(1) Eleventh Ltd’s operating profit for the six-month period ended 31 March 2016 is ￡122,900. Depreciation of ￡2,580 and amortisation of leasehold property of ￡2,000 (see note (2) below) have been deducted in arriving at this figure.

(2) On 1 October 2015, Eleventh Ltd acquired a leasehold office building, paying a premium of ￡60,000 for the grant of a 15-year lease. The office building was used for business purposes by Eleventh Ltd throughout the six-month period ended 31 March 2016.

(3) On 1 October 2015, Eleventh Ltd purchased two motor cars. The first motor car cost ￡12,600, and has aemission rate of 110 grams per kilometre. This motor car is used as a pool car by the company’s employees. The second motor car cost ￡13,200, and has aemission rate of 60 grams per kilometre. This motor car is used by Mable, and 45% of the mileage is for private journeys.

(4) On 1 October 2015, Mable made a loan of ￡100,000 to Eleventh Ltd at an annual interest rate of 5%. This is a commercial rate of interest, and no loan repayments were made during the period ended 31 March 2016. The loan was used to finance the company’s trading activities.

Required:

(a) Calculate Tenth Ltd’s taxable total profits for the four-month period ended 31 July 2015. (7 marks)

(b) Calculate Eleventh Ltd’s tax adjusted trading profit for the six-month period ended 31 March 2016. (8 marks)

(c) State any reliefs Bob could claim regarding the fall in value of his shares in Willis Ltd, and describe how the

operation of any such reliefs could reduce Bob’s taxable income. (4 marks)

Relevant retail price index figures are:

September 1990 129·3

April 1998 162·6

December 2004 189·9