(c) Advise Alan on the proposed disposal of the shares in Mobile Ltd. Your answer should include calculations

of the potential capital gain, and explain any options available to Alan to reduce this tax liability. (7 marks)

(c) What changes to Churchill’s existing marketing mix will be needed to achieve the three strategic goals?

(15 marks)

(c) Construct the arguments in favour of Professor Leroi’s remark that external reporting requirements on internal

controls were ‘too ambitious’ for small and medium companies. (4 marks)

3 Spica, one of the director shareholders of Acrux Ltd, has been in dispute with the other shareholders over plans to

expand the company’s activities overseas. In order to resolve the position it has been agreed that Spica will sell her

shares back to the company. Once the purchase of her shares has taken place, the company intends to establish a

number of branches overseas and acquire a shareholding in a number of companies that are resident and trade in

overseas 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 be

between 23% and 42%.

– There may or may not be a double tax treaty between the UK and the overseas countries in which the companies

are 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 companies

will 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 will

receive for her shares; (7 marks)

(b) Advise Sergio on the appropriateness of investing in a domestic rental property in view of his personal

circumstances and recommend suitable alternative investments giving reasons for your advice. (4 marks)

A corporate taxpayer has under-reported its taxable revenue in 2002 and hence underpaid value added tax (VAT) and enterprise income tax (EIT). In 2014, the taxpayer was charged by the tax authority with committing an act of tax evasion in 2002.

Which of the following statements is correct?

A.The taxpayer must pay the additional taxes due, plus a late payment surcharge and a penalty

B.There is no need for the taxpayer to pay any additional taxes, late payment surcharge or penalty as the statute of limitation is ten years

C.The taxpayer must pay the additional taxes, but no late payment surcharge or penalty as the statute of limitation is ten years for late payment surcharge and penalties

D.The taxpayer must pay the additional taxes and a late payment surcharge but not a penalty as the statute of limitation is five years for penalties