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(c) the deferred tax implications (with suitable calculations) for the company which arise from the recognition
of a remuneration expense for the directors’ share options. (7 marks)
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更多 “ (c) the deferred tax implications (with suitable calculations) for the company which arise from the recognitionof a remuneration expense for the directors’ share options. (7 marks) ” 相关考题
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Explain the grounds upon which a person may be disqualified under the Company Directors Disqualification Act 1986.(10 marks)
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3 The directors of Panel, a public limited company, are reviewing the procedures for the calculation of the deferred taxprovision for their company. They are quite surprised at the impact on the provision caused by changes in accountingstandards such as IFRS1 ‘First time adoption of International Financial Reporting Standards’ and IFRS2 ‘Share-basedPayment’. Panel is adopting International Financial Reporting Standards for the first time as at 31 October 2005 andthe directors are unsure how the deferred tax provision will be calculated in its financial statements ended on thatdate including the opening provision at 1 November 2003.Required:(a) (i) Explain how changes in accounting standards are likely to have an impact on the provision for deferredtaxation under IAS12 ‘Income Taxes’. (5 marks)
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Additionally the directors wish to know how the provision for deferred taxation would be calculated in the followingsituations under IAS12 ‘Income Taxes’:(i) On 1 November 2003, the company had granted ten million share options worth $40 million subject to a twoyear vesting period. Local tax law allows a tax deduction at the exercise date of the intrinsic value of the options.The intrinsic value of the ten million share options at 31 October 2004 was $16 million and at 31 October 2005was $46 million. The increase in the share price in the year to 31 October 2005 could not be foreseen at31 October 2004. The options were exercised at 31 October 2005. The directors are unsure how to accountfor deferred taxation on this transaction for the years ended 31 October 2004 and 31 October 2005.(ii) Panel is leasing plant under a finance lease over a five year period. The asset was recorded at the present valueof the minimum lease payments of $12 million at the inception of the lease which was 1 November 2004. Theasset is depreciated on a straight line basis over the five years and has no residual value. The annual leasepayments are $3 million payable in arrears on 31 October and the effective interest rate is 8% per annum. Thedirectors have not leased an asset under a finance lease before and are unsure as to its treatment for deferredtaxation. The company can claim a tax deduction for the annual rental payment as the finance lease does notqualify for tax relief.(iii) A wholly owned overseas subsidiary, Pins, a limited liability company, sold goods costing $7 million to Panel on1 September 2005, and these goods had not been sold by Panel before the year end. Panel had paid $9 millionfor these goods. The directors do not understand how this transaction should be dealt with in the financialstatements of the subsidiary and the group for taxation purposes. Pins pays tax locally at 30%.(iv) Nails, a limited liability company, is a wholly owned subsidiary of Panel, and is a cash generating unit in its ownright. The value of the property, plant and equipment of Nails at 31 October 2005 was $6 million and purchasedgoodwill was $1 million before any impairment loss. The company had no other assets or liabilities. Animpairment loss of $1·8 million had occurred at 31 October 2005. The tax base of the property, plant andequipment of Nails was $4 million as at 31 October 2005. The directors wish to know how the impairment losswill affect the deferred tax provision for the year. Impairment losses are not an allowable expense for taxationpurposes.Assume a tax rate of 30%.Required:(b) Discuss, with suitable computations, how the situations (i) to (iv) above will impact on the accounting fordeferred tax under IAS12 ‘Income Taxes’ in the group financial statements of Panel. (16 marks)(The situations in (i) to (iv) above carry equal marks)
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(b) a discussion (with suitable calculations) as to how the directors’ share options would be accounted for in thefinancial statements for the year ended 31 May 2005 including the adjustment to opening balances;(9 marks)
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(c) On 1 May 2007 Sirus acquired another company, Marne plc. The directors of Marne, who were the onlyshareholders, were offered an increased profit share in the enlarged business for a period of two years after thedate of acquisition as an incentive to accept the purchase offer. After this period, normal remuneration levels willbe resumed. Sirus estimated that this would cost them $5 million at 30 April 2008, and a further $6 million at30 April 2009. These amounts will be paid in cash shortly after the respective year ends. (5 marks)Required:Draft a report to the directors of Sirus which discusses the principles and nature of the accounting treatment ofthe above elements under International Financial Reporting Standards in the financial statements for the yearended 30 April 2008.
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(b) Explain the capital gains tax (CGT) and inheritance tax (IHT) implications of Graeme gifting his remaining ‘T’ordinary shares at their current value either:(i) to his wife, Catherine; or(ii) to his son, Barry.Your answer should be supported by relevant calculations and clearly identify the availability and effect ofany reliefs (other than the CGT annual exemption) that might be used to reduce or defer any tax liabilitiesarising. (9 marks)
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(b) (i) Advise Alasdair of the tax implications and relative financial risks attached to the following propertyinvestments:(1) buy to let residential property;(2) commercial property; and(3) shares in a property investment company/unit trust. (9 marks)
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(c) State the tax consequences for both Glaikit Limited and Alasdair if he borrows money from the company, asproposed, on 1 January 2006. (3 marks)
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(ii) Explain the income tax (IT), national insurance (NIC) and capital gains tax (CGT) implications arising onthe grant to and exercise by an employee of an option to buy shares in an unapproved share optionscheme and on the subsequent sale of these shares. State clearly how these would apply in Henry’scase. (8 marks)
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(b) (i) Advise Benny of the income tax implications of the grant and exercise of the share options in SummerGlow plc on the assumption that the share price on 1 September 2007 and on the day he exercises theoptions is ￡3·35 per share. Explain why the share option scheme is not free from risk by reference tothe rules of the scheme and the circumstances surrounding the company. (4 marks)
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(b) Explain the advantages from a tax point of view of operating the new business as a partnership rather thanas a company whilst it is making losses. You should calculate the tax adjusted trading loss for the yearending 31 March 2008 for both situations and indicate the years in which the loss relief will be obtained.You are not required to prepare any other supporting calculations. (10 marks)
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(b) (i) State the condition that would need to be satisfied for the exercise of Paul’s share options in Memphisplc to be exempt from income tax and the tax implications if this condition is not satisfied.(2 marks)
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(b) Peter, one of Linden Limited’s non-executive directors, having lived and worked in the UK for most of his adultlife, sold his home near London on 22 March 2006 and, together with his wife (a French citizen), moved to livein a villa which she owns in the south of France. Peter is now demanding that the tax deducted from his director’sfees, for the board meetings held on 18 April and 16 May 2006, be refunded, on the grounds that, as he is nolonger resident in the UK, he is no longer liable to UK income tax. All of the company’s board meetings are heldat its offices in Cambridge.Despite Peter’s assurance that none of the other companies of which he is a director has disputed his change oftax status, Damian is uncertain whether he should make the refunds requested. However, as Peter is a friend ofthe company’s founder, Linden Limited’s managing director is urging him to do so, stating that if the tax doeshave to be paid, then Linden Limited could always bear the cost.Required:Advise Damian whether Peter is correct in his assertion regarding his tax position and in the case that thereis a UK tax liability the implications of the managing director’s suggestion. You are not required to considernational insurance (NIC) issues. (4 marks)
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4 (a) For this part, assume today’s date is 1 March 2006.Bill and Ben each own 50% of the ordinary share capital in Flower Limited, an unquoted UK trading companythat makes electronic toys. Flower Limited was incorporated on 1 August 2005 with 1,000 ￡1 ordinary shares,and commenced trading on the same day. The business has been successful, and the company has accumulateda large cash balance of ￡180,000, which is to be used to purchase a new factory. However, Bill and Ben havereceived an offer from a rival company, which they are considering. The offer provides Bill and Ben with twoalternative methods of payment for the purchase of their shares:(i) ￡480,000 for the company, inclusive of the ￡180,000 cash balance.(ii) ￡300,000 for the company assuming the cash available for the factory purchase is extracted prior to sale.Bill and Ben each currently receive a gross salary of ￡3,750 per month from Flower Limited. Part of the offerterms is that Bill and Ben would be retained as employees of the company on the same salary.Neither Bill nor Ben has used any of their capital gains tax annual exemption for the tax year 2005/06.Required:(i) Calculate which of the following means of extracting the ￡180,000 from Flower Limited on 31 March2006 will result in the highest after tax cash amount for Bill and Ben:(1) payment of a dividend, or(2) payment of a salary bonus.You are not required to consider the corporation tax (CT) implications for Flower Limited in youranswer. (5 marks)
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(ii) Advise Andrew of the tax implications arising from the disposal of the 7% Government Stock, clearlyidentifying the tax year in which any liability will arise and how it will be paid. (3 marks)
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(ii) State the taxation implications of both equity and loan finance from the point of view of a company.(3 marks)
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(ii) Advise Clifford of the capital gains tax implications of the alternative of selling the Oxford house andgarden by means of two separate disposals as proposed. Calculations are not required for this part ofthe question. (3 marks)
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(iii) The extent to which Amy will be subject to income tax in the UK on her earnings in respect of dutiesperformed for Cutlass Inc and the travel costs paid for by that company. (5 marks)Appropriateness of format and presentation of the report and the effectiveness with which its advice iscommunicated. (2 marks)Note:You should assume that the income tax rates and allowances for the tax year 2006/07 and the corporation taxrates and allowances for the financial year 2006 apply throughout this questio
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(ii) Advise Mr Fencer of the income tax implications of the proposed financing arrangements. (2 marks)
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(b) Explain the corporation tax and value added tax (VAT) implications of the following aspects of the proposedrestructuring of the Rapier Ltd group.(i) The immediate tax implications of the restructuring. (6 marks)
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(b) The directors of Carver Ltd are aware that some of the company’s shareholders want to realise the value in theirshares immediately. Accordingly, instead of investing in the office building or the share portfolio they areconsidering two alternative strategies whereby, following the sale of the company’s business, a payment will bemade to the company’s shareholders.(i) Liquidate the company. The payment by the liquidator would be ￡126 per share.(ii) The payment of a dividend of ￡125 per share following which a liquidator will be appointed. The paymentby the liquidator to the shareholders would then be ￡1 per share.The company originally issued 20,000 ￡1 ordinary shares at par value to 19 members of the Cutler family.Following a number of gifts and inheritances there are now 41 shareholders, all of whom are family members.The directors have asked you to attend a meeting to set out the tax implications of these two alternative strategiesfor each of the two main groups of shareholders: adults with shareholdings of more than 500 shares and childrenwith shareholdings of 200 shares or less.Required:Prepare notes explaining:– the amount chargeable to tax; and– the rates of tax that will applyin respect of each of the two strategies for each of the two groups of shareholders ready for your meetingwith the directors of Carver Ltd. You should assume that none of the shareholders will have any capitallosses either in the tax year 2007/08 or brought forward as at 5 April 2007. (10 marks)Note:You should assume that the rates and allowances for the tax year 2006/07 will continue to apply for theforeseeable future.
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(c) The inheritance tax payable by Adam in respect of the gift from his aunt. (4 marks)Additional marks will be awarded for the appropriateness of the format and presentation of the memorandum andthe effectiveness with which the information is communicated. (2 marks)Note: you should assume that the tax rates and allowances for the tax year 2006/07 will continue to apply for theforeseeable future.
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(c) Explanatory notes, together with relevant supporting calculations, in connection with the loan. (8 marks)Additional marks will be awarded for the appropriateness of the format and presentation of the schedules, theeffectiveness with which the information is communicated and the extent to which the schedules are structured ina logical manner. (3 marks)Notes: – you should assume that the tax rates and allowances for the tax year 2006/07 and for the financial yearto 31 March 2007 apply throughout the question.– you should ignore value added tax (VAT).
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(b) State the immediate tax implications of the proposed gift of the share portfolio to Avril and identify analternative strategy that would achieve Crusoe’s objectives whilst avoiding a possible tax liability in thefuture. State any deadline(s) in connection with your proposed strategy. (5 marks)
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3 Spica, one of the director shareholders of Acrux Ltd, has been in dispute with the other shareholders over plans toexpand the company’s activities overseas. In order to resolve the position it has been agreed that Spica will sell hershares back to the company. Once the purchase of her shares has taken place, the company intends to establish anumber of branches overseas and acquire a shareholding in a number of companies that are resident and trade inoverseas countries.The following information has been obtained from client files and meetings with the parties involved.Acrux Ltd:– An unquoted UK resident company.– Share capital consists of 50,000 ordinary shares issued at ￡1·90 per share in July 2000.– None of the other shareholders has any connection with Spica.The purchase of own shares:– The company will purchase all of Spica’s shares for ￡8 per share.– The transaction will take place by the end of 2008.Spica:– Purchased 8,000 shares in Acrux Ltd for ￡2 per share on 30 September 2003.– Has no income in the tax year 2008/09.– Has chargeable capital gains in the tax year 2008/09 of ￡3,800.– Has houses in the UK and the country of Solaris and divides her time between them.Investment in non-UK resident companies:– Acrux Ltd will acquire between 15% and 20% of each of the non-UK resident companies.– The companies will not be controlled foreign companies as the rates of tax in the overseas countries will bebetween 23% and 42%.– There may or may not be a double tax treaty between the UK and the overseas countries in which the companiesare resident. Where there is a treaty, it will be based on the OECD model treaty.– None of the countries concerned levy withholding tax on dividends paid to UK companies.– The directors of Acrux Ltd are concerned that the rate of tax suffered on the profits of the overseas companieswill be very high as they will be taxed in both the overseas country and in the UK.Required:(a) (i) Prepare detailed calculations to determine the most beneficial tax treatment of the payment Spica willreceive for her shares; (7 marks)
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(c) Identify and discuss the implications for the audit report if:(i) the directors refuse to disclose the note; (4 marks)
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