- June 8, 2018 at 11:02 pm
Sorry in advance for the length of this!
Q1 part 1, never come across this scenario before so did the MV less proceeds do 260-225=35k less 2 annual exemptions so £29k GCT, from the date of sale going back 7 years prior left £7k of NRB (I put an assumption that the spouse NRB was not available, they gave no info), then the usual 40% and taper relief.
For CGT, £260k less cost £165k = £95k gift relief hence base cost of £225k what he paid less £95k = £130k.
Q1 part 2, far too long to say all, don’t remember, the only thing I remember doing for partial exemption was adding back the 24% irrecoverable VAT to the expenses for the expansion plans A and B (pretty sure this is part wrong!). The pre tax additional profit I remember my figures being very similar with numbers like £84,385 and £83,853
Q1 part 3 was hopefully a gift.
I then did Q4, part a I remember something about 20% MV of the laptop and the redundancy package was the MV it was gifted or if higher the MV at date provided less the benefit for the year which was higher IIRC. The stat red pay reduced the ex gratia limit to £12k hence the taxable element was £20k.
Part b was current year loss relief (insufficient earnings), previous year (save the red pay at AR 45% and some at 40%) or the extended CB to 15/16 where some tax saved at 40%, some at 60% hence was the best option.
Part c I also went with £3,600 (rental income didn’t specify Furnished Holiday so I stated assumption it’s not relevant earnings), then the next year £40k plus the unused £36,400.
I then did Q2, part a Steam and Ghost NGNL transfer as part of gains group and G had joined group by the date of building sale. For Wagon trade loss b/f only usable by Wagon generating trade profits, the loss in the year however could be Group relieved however only for the corresponding period as G only joined group on June 18.
Part b on VAT, the non-EU import charge VAT on entering country and then claim input on next return, despite it saying no VAT in that country. For the EU sale charge standard rate as the company was not VAT reg.
Part c I said Dee Co, less than 25% OSC so CFC does not apply, for the other the low profits exemption doesn’t apply as non-trade income over £50k despite profit under £500k, then for the low margin I added the operating expenditure to the accounting profit to get turnover of £3,480,000 and I was clutching at straws with the 10% margin so said the taxable profit of 350 over 3,480 was was below 10% but I’m sure they would have a CFC charge for one?!
Part d i said current year claim, carry back, then carry forward. Not sure if correct, but I said group relief too. I might have also mentioned that they could take a 14.5% repayment but better to save 19% with group relief especially given it would reduce instalments (q stated you can’t get out of instalment threshold).
Finally, q3! Part a was gift relief but time apportion so only on the period it was used in the business. For part a 2 I think I referred to dying within 3 years of the gift hence no taper relief available.
Which led on to the last 12 marks of the exam in part b and c! My mind completely blanked on me at this stage. I made reference to being temporary non-res hence the warehouse being bought before he left would still be UK CGT regardless of when he left. I almost fell into the trap of sell it when he’s abroad and save CGT! Once I realised this, I froze and couldn’t figure out what the benefit is of delaying the sale.
For the first scenario I said the cost of £72,000 had to be lowered by the rollover gain of £16,000 so £56,000. I can see now that he’s only reinvested £72,000 not the £78,000 so maybe rollover of £10k to lower the cost to £62,000?! Add on the proceeds for the gain.
For scenario 2, I deduced no rollover because of the time, basically made it up and I’m sure is wrong.
So felt like I did well for 88 marks of the exam and just flopped the last 12 marks. I’m hoping I got the marks early on for the pass.
When I look back, I’m sure stamp duty should have been in there somewhere!June 8, 2018 at 11:24 pm
id you write bout research development lossesJune 9, 2018 at 2:55 am
I wasn’t too sure so writ what I mentioned in my previous post.
For 7 marks I assume they wanted 7 points on how to relive the losses and how you would choose which is best. I’m sure most of this is to do with R&D.
The only decent points I recall making was they can elect for the tax credit of 14.5% but I don’t think I mentioned what that would relate to ie how much of the loss you get the credit on.
The options as far as I’m aware are the standard carry back, carry forward and the tax credit. Though I may have said to group relieve the loss which I’m not sure you can do!
UPDATE: a google search is suggesting you can group relieve the R&D loss too which makes my answers argument that a better to group relieve and save 19% CT then take a 14.5% tax credit.June 9, 2018 at 7:18 am
In Q2 Part C. it was large company so ALT must be 11% rather thn 14.5%. and In Q 4. Gift relief will be crystallize when transferor become non resident following the 6 year from date of transfer. So when Max leave UK GIFT relief will crystallizeJune 9, 2018 at 7:34 am
It wasn’t a large company because the question specifically said some of the R&D expenditure would qualify for the 130% extra credit, which means it was a Small or medium company.
I think I said it could use current period loss relief, then it could carry back. Or it could group relieve or use R&D 14.5% tax credit against its surrenderable loss. It would need to consider timing of relief, amount of relief and also loss of any potential qualifying charitable donations. Not sure I got all the points to it, but hopefully got most of them.June 9, 2018 at 2:37 pm
I think the comments above confirm I have made a pig’s ear of my exam to put it politely!! Just a question with regards to the iht question you guys said you deducted the annual exemptions related to the pet, I thought since we were calculating the maximum iht liability, I assumed it meant therefore it would no longer be a pet if iht was to be calculated ie worst case scenario he died, therefore annual exemptions only available during lifetime. I never included these in the value of the gift. Did everyone include these?June 9, 2018 at 4:02 pm
A PET always uses the Annual exemption (unless it’s already used), so for example £26k transfer less the AE for current year and previous year of £3k each leaves a gross chargeable transfer of £20k (not actually a GCT during the lifetime of the donor). On death, the £20k figure is used because though an annual exemption is not available on death, it was utilised on the lifetime transfer. That’s my understanding anyway.June 9, 2018 at 4:53 pm
Ah makes sense. Am sure I have done terribly! Glad it’s all over nonetheless!June 11, 2018 at 5:58 pm
I thought Q1 was relatively fair, other than the tricky IHT value which I hadn’t done anything on really either.
I then attempted Q2, Q4, before leaving Q3 until last.
The lack of choice between questions threw me slightly, I definitely didn’t do well on Q3 I thought it was horrible.
I also hadn’t really done anything on CFC’s so just guessed that one.
I thought the R&D question was tricky also, I couldn’t really work out what they were actually asking?
My initial thought when I came out was that I hadn’t quite done enough but wasn’t too disheartened as I would keep it fresh and do it in September alongside my Strategic Business Leader exam but I’m absolutely gutted to find out this morning that ACCA UK have changed their exam days and they’ll be on the same day in September so I can only sit one.
I was due to start my SBL course tomorrow night but I haven’t got a clue what to do nowJune 11, 2018 at 6:09 pm
Does anyone know when the June 2018 answers will be online?June 14, 2018 at 3:49 pm
I so agree with you: I though I did well until I saw Q1, which I left till the end… Time pressure got to me and I couldn’t focus. I hope the rest of the questions will push me over the line
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