Your manager has received a letter from Christina. Christina is the managing director of Sprint Ltd and owns the whole of that company's ordinary share capital. Sprint Ltd is a client of your firm.

Extracts from the letter from Christina and an email from your manager are set out below.

Extract from the letter from Christina
I intend to purchase the whole of the ordinary share capital of Iron Ltd on 1 November 2015. My company, Sprint Ltd, purchases components from Iron Ltd, so the two companies will fit together well. I hope to increase the value of Iron Ltd over the next three to five years and then to sell it at a profit. I need your advice on the following matters:

Ownership of Iron Ltd
I need to decide whether I should purchase the shares in Iron Ltd personally or whether the shares should be purchased by Sprint Ltd. I will be the managing director of Iron Ltd regardless of who purchases the shares. My preference would be to own Iron Ltd personally. However, I would be interested to learn of any advantages to the company being owned by Sprint Ltd. When Iron Ltd is eventually sold, I intend to use the proceeds to purchase a holiday home in Italy.

Please carry out the work set out below.
 There will be quite a few points to draw to Christina's attention, so keep each one fairly brief.

(b) Ownership of Iron Ltd
Explain the tax matters which Christina needs to be aware of in order to decide whether the ordinary share capital of Iron Ltd should be purchased by herself, personally, or by Sprint Ltd. You should assume that Iron Ltd will be required to register for VAT.
You should consider the tax implications of both: 
the ownership of Iron Ltd;
and the eventual sale of Iron Ltd (by either Christina or Sprint Ltd).

You should recognise that, regardless of who purchases and subsequently sells Iron Ltd, Christina intends to use the proceeds for personal purposes and that she is a higher rate taxpayer.

Tax manager

Required: Carry out the work required as requested in the email from your manager. The following marks are available: (b) Ownership of Iron Ltd. (12 marks)