[ukhn]

Q1 A (i) – (10 Marks)
Acq to overseas companies – Treating as Branches – Implications and calculation of C/T
1 – if profits are exempt (election is made)
2 – if election is not made

Answer
1 company was making profits – 1 was making losses

Conditions if election made
– no UK tax on profits transferred
– cannot transfer losses to UK – or get relief for them
– cannot get capital allowances

Conditions if election not made
conditions opposite of above.

Calculate C/T for both effects (i applied 20% tax using normal limits for an individual company)- i made 1 mistake – according to the conditions above it was a matter of accept all or reject all – however i included the profits of overseas branch and excluded the losses – i should have excluded the profits of overseas branch too.

Q1 A (ii) (8 marks)
Acq to overseas companies – Treating as subsidiary (Implications) + CFC (why not applicable)

Treating as subsidiary – Implications

– Profits – these are treated as dividends (already grossed) and taxed under C/T
– Losses – these cannot be transferred to the UK – as sub not resident in the UK and also FX complications
– Upper and lower limits – are still affected from group prospective as sub is an associate of the group

CFC –
said what CFC is

Conditions
Holding period exemption – this was being met – as sub purchased at start of the year – therefore no C/T this year

Net profit exemption
Net profit margin exemption
Excluded territory exemption
Overseas taxed profit levels exemption

B – VAT (Import from Outside EU and acquisition from With EU) – (5 Marks)

Sale of trade and assets at MV within the group + C/T & SDLT implications- 8 marks

Did lower of cost and TWDV – showedd taxables for all assets – there was indexation on PP&E

C/T & SDLT implications
inter group transaction so no c/t implication unless degrouping occurs
sdlt – payable by purchase on purchase price – n/a as inter group

Q2 –
A – (17 Marks)
4 errors
1 – about property income – treated of rent required on accrual basis and total up the partnership and slip 80:20

2 – some purchase of share – can’t remember to much about this – just did a simple calculation of gain arising on sale i think

3 – loss on sale of shares – not disclosed to HMRC – could have relived capital losses etc

4 – IHT on overseas property (160k) which was excluded in the IHT calculation – and remaming death estate has IHT of 68k – spoke about deemed domocile status of the person – NRB being fully used due to 68k IHT liability – and hence 160 would incure additional IHT at 40%

B – (3 marks) – penalties for errors – spoke about simple error – deliberate and deliberate and concealing with max and min penalties

c – (5 marks) ethics on whether we should accept the client

client due diligence
client reference check
agreement for provision of information from client
our own competence and time
agreement on fees and deliverables – to minimise expectation gap

Q3 –
A – CGT implications of disposals (6 marks)

(3) insurance proceeds recieved for damaged painting that was not repaired and hence part disposal + showed the calculation
(3) disposal of share – showed the disposal and a point about intial gift relief claim when shares recieved from eric’s sister

B – (6) Availability of APR BPR and QSR – if dies on 31st march 13
outlined the conditions and said avilability – APR on agriculrual value – BPR 50% due to quoted shares

c – PET cash in 2009 (3) – if dies in 2016 – implications
quite simple

D- (5 Marks) – PSC
showed the calculation in the performa – did calculation only

Q4 –
A – (4 capital method treatment) – have 10k shares – was selling either 2700 or 3200
wrote the conditions
and said how sale is >30% if 3200 sold and remaining shares <75% if 2700 sold

A (i) (4 marks) – calulation of the 2 options
i did both at capital treatment – i think the requirement was 1 of each – capital and non capital disposal

B – (5 marks) – newly acq business – wheather 1st year losses can be adjusted
spoke about the conditions for restriction of losses if new business changes trade 3 year pre or post joining
they were looking to expand overseas and hence fails condition therefore losses would be restricted

B (i) (3 marks) bought the brand and some impact on P&L
treated as intangibles — but may be patent box – got it wrong

(C) (4 marks) transfer of going concern – but should the building be vatable?

Write TOGC conditions and said how its outside the scope of vat

Buuilding needs to be treated as seperate component – depends if opt in or not.. if opt in then vatable as the seller would have been able to recover input vat on maintainnace costs.

[ukhn]

@blueocean said:
Hello to everyone and good luck!

Can someone debrief abour wip treatmnet (ias2, ias 16 or something else e.g. ias 11)?

IAS2 – Because they sell this equipment therefore its stock!
IAS 16 is Assets like PP&E and IAS 11 is constuction contracts where you are building PPE for own use that you capitalise

Risks – Hold WIP at lower of cost at NRV, risk that returned stock is obselete but still held at cost therefore stock overstate and expense understated.

Evidence
Its ias 2
issues were..establishing how much is stock and how much is obsolete stock but still recorded at cost etc

They were building bespoke assets and alot of it was returned and therefore no resale value as such leading to obsolescence and stock over stated.

1-obtain stock requisition sheets to establish level of stock at year end! and incomplete machinery would be held as stock ensure any returns are excluded for obsolescence reasons

2-Obtain purchase document of components that form part of WIP machinary and verify cost and confirm the same to bank payments

3 – For any revenue recorded in relation to WIP confirm that the product it relates to is not on the stock counts sheet and that its delivered to customer before year end

4 – spoke about provision for returned stock as well – can’t remember the evidence i wrote tho

[ukhn]

Question 3 on on matters to consider and evidence.
Part B (6 marks) was the company acquring 10% of another company’s equity shares and recognizing this at cost – and presenting it as Investments on SFP
standard that applies but which i did not write about is IAS 28

this is what i wrote.
1-Materiality
2-said that the presentation and recognistion is correct ..
3-but they could also revalue it as the other company was experienecing rapid growth (no sure about this being correct)
Evidence
Purchase document – confirm amount and payment to bank statement
refer to board meeting minutes where purchase was approved
Inspect share holder register of the other company (if feasable) to verify 10% holding

[Author]

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