1 Today’s date is 8 June 2005.David and Debbie were an elderly couple who had worked hard

1 Today’s date is 8 June 2005.

David and Debbie were an elderly couple who had worked hard and over a number of years they built up a successful

family company, Dee Limited. Their success allowed them to accumulate a series of investments. David died in May

2005. Debbie is 66 and still in good health.

The couple had two children, Andrew and Allison. Andrew, aged 37, is single but is shortly to be married. He is the

managing director of the family trading company, Dee Limited, which was set up 30 years ago by David and Debbie.

Both Andrew and Allison are shareholders in the company, although Allison does not work for the company. She is

32, and lives abroad with her husband and two children (aged 2 and 4) in a villa gifted to her by Debbie in June

2003. The villa was worth £180,000 at that time, but the current value has fallen to £110,000 as a result of

exchange rate movements.

Dee Limited is currently worth £1,260,000 in total, and the value is unlikely to change in the foreseeable future. The

shareholdings in the company at the date of David’s death (May 2005) were held as follows:


(a) Calculate the inheritance tax (IHT) that will be payable as a result of David’s death. Your answer should

include calculations of the tax arising on any lifetime transfers and give reasons for any reliefs given.

(12 marks)


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(b) (i) Calculate the inheritance tax (IHT) that will be payable if Debbie were to die today (8 June 2005).Assume that no tax planning measures are taken and that there has been no change in the value of anyof the assets since David’s death. (4 marks)
(ii) State when the inheritance tax (IHT) calculated in (i) would be payable and by whom. (2 marks)
(c) Assuming that she will survive until July 2009, advise on the lifetime inheritance tax (IHT) planningmeasures that could be undertaken by Debbie, quantifying the savings that can be made. (7 marks)For this question you should assume that the rates and allowances for 2004/05 apply throughout.
2 Assume that today’s date is 1 July 2005.Jan is aged 45 and single. He is of Danish domicile but has been working in the United Kingdom since 1 May 2004and intends to remain in the UK for the medium to long term. Although Jan worked briefly in the UK in 1986, hehas forgotten how UK taxation works and needs some assistance before preparing his UK income tax return.Jan’s salary from 1 May 2004 was £74,760 per annum. Jan also has a company car – a Jaguar XJ8 with a list priceof £42,550 including extras, and CO2 emissions of 242g/km. The car was available to him from 1 July 2004. Freepetrol is provided by the company. Jan has other taxable benefits amounting to £3,965.Jan’s other 2004/05 income comprises:                                                                                 £Dividend income from UK companies (cash received)                                3,240Interest received on an ISA account                                        230Interest received on a UK bank account                                                            740Interest remitted from an offshore account (net of 15% withholding tax)          5,100Income remitted from a villa in Portugal (net of 45% withholding tax)                           4,598The total interest arising on the offshore account was £9,000 (gross). In addition, Jan has not remitted otherPortuguese rental income arising in the year, totalling a further £1,500 (gross).Jan informs you that his employer is thinking of providing him with rented accommodation while he looks for a houseto buy. The accommodation would be a two bedroom flat, valued at £155,000 with an annual value of £6,000. Itwould be made available from 6 August 2005. The company will pay the rent of £600 per month for the first sixmonths. All other bills will be paid by Jan.Jan also informs you that he has 25,000 ordinary shares in Gilet Ltd (‘Gilet’), an unquoted UK trading company. Hehas held these shares since August 1986 when he bought 2,500 shares at £4.07 per share. In January 1994, abonus issue gave each shareholder nine shares for each ordinary share held. In the last week all Gilet’s shareholdershave received an offer from Jumper plc (‘Jumper’) who wishes to acquire the shares. Jumper has offered the following:– 3 shares in Jumper (currently trading at £3.55 per share) for every 5 shares in Gilet, and– 25p cash per shareRequired:(a) Calculate Jan’s 2004/05 income tax (IT) payable. (11 marks)



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