*** December 2021 ACCA ATX exam – Instant Poll and comments ***

It was a fair paper, but I just don’t think I wrote enough.

Badr was only partial due to limit of 1m
Did anyone find there was no place for the overlap profits and the interest income. I felt it was given for a reason but just couldn’t work out where to put it. Feel as if I’ve missed something.

I couldn’t work out if the trust for the grandchildren was still a related party to work out what % share polly had. I went with trust not being a related party, but I’m thinking technically they are related.
This was to calculate the decrease in value.

I ran out of time for the 8 mark question for the 16 month period. It was a change of accounting date and we had to use overlap profits to work out the amount due for that year to make it in line with a 12 month period. But I didnt complete it as I just did not have enough time. i foucsed on the other easier marks.

Gift of shares and related property – that was a nice one. So was the one before that with the sale of shares to sister Elberta which was just an undervaluation and did have investors relief of 10mill plus gift relief of partial amount and the rest CGT at 10%.

The question on the shares where it was transferred to son or daughter was related property so had to take into account husband and her. Hopefully I got that right.

In terms of the first big question, what did you guys do for the equipment re incorporation relief? Did you include it as part of a gain? I think the total gain was under 1 million so it qualified for BADR (ALL of it as goodwill and building did too). I am just not sure how I should have treated the equipment where on the main pool there was a nil balance??? The goodwill qualified as it was transferred to an unconnected company where ownership was less than 5%

Also the capital losses realised after Atearka purchased Hipak? I said it was allowable as they were not pre entry capital losses. However, the trading losses were.

About losses it was like cf before the acquisition trading losses and so I said they will be restricted as the change of ownership for 5 years

The capital losses where as I remember 20 July 2021. Acquisition was 1 July 2021. And there was also a gain as well in the year. So I applied the losses within Hipak first. And only then it can transfer to A.

The trust question was CLT paid by donor so 25% applied. Less annual exemption and NRb but she had pre transfer of cash /probably 68,000/ so it will reduce nrb.

I ignored the cash completely within the cgt iht question as just thought cash is exempt from cgt but didn’t think it through for nrb :(.

Oh and annoyingly didn’t even make a remark about cash being exempt for cgt

Lou82, You are right cash is exempt from cgt. But it will be a part of iht when you calculate the CLT and we need to include it part 7 years transfer

But the question was to calculate the iht – nothing about cgt

Thats kind of what i did but in a very vague fashion. And forgetting the overlap profits

How i answered…no idea if right or wrong

Q1 part a was about selling assets to a business of a unincorporated trader. I worked out gain on GW and Building would transferred and chargeable gain which will qualify for BADR. Equipment would be entitled for capital allowances so would have a balancing charge on the trading profits. I mentioned GW will attract BADR because the transfer to MO Ltd is not a close company.

CGT would be at 10% but only for element up to £1m lifetime max for BADR rest at 20%

Part B

I think it provided profits on cessation but when I ran the numbers it used up the BRB so CGT at 20%. The sale was to a Plc company where incorporation relief would apply 100%, so although Nico was employee of the company, held the assets/shares for more than 2 years (combined period of sole trader and plc acquistion) it would not qualify for BADR on the eventual sale of shares (partly) because he does not own 10% or more.

There was mention about VAT on the assets…I simply said TOGC would mean no VAT…building was over 3 years so exempt unless option to tax is chosen (which is not the case)

VAT other matters – mind went blank here

It also asked any matters around the building transfer….I thought hmm must be talking about SBA when I mentioned about.

There was mention about non tax advantaged shares…I simply said no tax on grant date but income tax on exercise date…(there was little numbers so made up my own) I did say class 1 NIC would apply because because shares are in plc which are readily convertible to cash.

I forgot to mention about CGT on eventual sale of shares but then again maybe question said talk about income tax …so might not be relevant.

In all this rush to answer the question I forgot to present this in report format …prob lost a few marks here.

Q2 mentioned Investor relief applies because it was newly subscribed shares after Mar 2016.

There was a mention of sale of subsidiary where SSE would apply but had intangible asset transfered at tax nuetral basis where degrouping charge applies as under 6 years….I could not remember exact rules in the exam so guess add to proceeds of shares (which is wrong ..should be included on the company leaving group)

Q3 was about residency ties test. My conclusion she is UK resident in 2022/23

Calc Income tax on arising basis for UK tax …had to include UK salary and DTR would apply (when I ran numbers the OS tax was lower of two)

Everlyn changed her domicile by choice but dies in 2 years. I said as per IHT rules domicile of choice won’t apply until after 3 years lapse and thus will be subject to UK IHT.

I worked this out assuming Residence nill rate band applied as decendant (son) got main residence house. Though I noted it was over £2m (apparently the RNB is meant to be restricted if over £2m but unsure examinable for ACCA)

There was question about transfer into Trust which is CLT …so I worked it out at 25% but now reading other answer I think I forgot to use the NRB so maybe it was not chargeable.

CGT I said if charged to IHT the will qualify for gift relief so no charge…but reading answer it was cash so no CGT on cash …so probably thay was the correct answer.

There was a question of gift shares cheaply to sister …I worked it out as gift relief (balance) applicable but chargeable gain on profit element (I.e cheap shares sold for less cost)

CGT @20% because I think she was additional rate payer.

Another question on investment property income.
The loan acquisition cost I said allowable expense to property income (guess)
The fridge replacement cost allowable at New cost less price received on selling old fridge.
Both these item would get 45% tax relief as she was additional rate tax payer

But the capital loan repayment not allowable any circumstances….
The interest element was deducted not from property income but income tax reducer at max 20% tax relief.

Q4 there was loss relief and capital loss…the capital was not pre acquisition so i just assumed company would need to net off against gains first so new parent cannot have this loss
…the trading loss was before acquisition but question clearly said no change in trade or conduct…so I guess cannot use loss for 5 years by group but can carry forward loss in meantime.

Last past was odd and seemed abit too easy I think for ATX….must more to this

It has 16 month period (remember it’s a ltd company and not sole trader so cannot reduce the profits assessment with overlap profits – which there was none)

I simply split over 2 accounting periods of 12 month and 4 months …..pro-rata profits….trading loss bf above netted off trading profits and net gains overall (capital loss against capital gain) all taken to first 12 months

The TTP for both period I applied CT @ 19%
Then worked out payment dates 9 months and 1 day after each Accounting period.

Like I said abit too easy for the marks so must be more to the story.

I don’t think there’s a degrouping charge if SSE applies on that one?

With respect to equipment and capital allowances, you can still have a gain on the equipment even if it qualified for capital allowances. It will be a wasting chattel with capital allowances. What you cant have is a capital loss. At least that is what I understood it to be. What I found strange is that it didnt give the cost the item was purchased for. I scanned the information numerous times. I was very usure about this one.

i think you had to work out the other income to work out how much of the basic rate band was remaining (think i calculated about £5k)

on the last question, the 4 month period qualified them as a large company (1.5m divided by 4 companies/12*4 (months)) so had to list the quarterly payment dates I believe.

some nice questions on sufficient ties, domicile, related property or IHT.

nothing on IR35/Partial Exemption/share schemes – seemed like a nice paper to me but will never know until results day!

BTW for @PQmagazine ( i know you read the forums and put it on your website) – there was a girl next to me in Manchester who had a tech issues as well…

She was typing and in the middle of exam – an alert appeared. Some tech support people came straight away to her, took pictures of this message. But she was luckily resolved straight away.

Does anyone remember a question about patent in requirements?
There was information given about it, but I did not use it because there were no question about it.
I think I missed it and remembered at home only.