ACCA ATX ^UK Syllabus C. Ethics - Ethics - Past Papers ^{1 / 1}

Your manager has sent you a schedule prepared by Claire Falkner concerning her company, Plad Ltd. The covering email from your manager details the work he requires you to do. The two documents are set out below.

Attachment: Schedule from Claire Falkner – dated 3 June 2019

Plad Ltd
I have owned the whole of the ordinary share capital of Plad Ltd since 2004. Plad Ltd trades mainly in the UK and is a UK resident company. It purchases components from third parties to be assembled into finished products. It also has a permanent establishment in the country of Chekka. The profits realised in Chekka are subject to 14% Chekkan business tax. There is no double tax treaty between the UK and the country of Chekka.

Plad Ltd – unreported chargeable gain
I have just discovered that a chargeable gain of £21,600 realised by Plad Ltd in the year ended 30 June 2015 was omitted from its corporation tax return. However, because the gain arose in respect of the sale of land, it was reported for the purposes of stamp duty land tax. Accordingly, I assume we do not need to do anything and that HM Revenue and Customs (HMRC) will contact us about this at some point.

Extract from the email from your manager – dated 4 June 2019

(c) Plad Ltd – unreported chargeable gain

Explain the implications for Plad Ltd, and our firm, of the failure to report the chargeable gain to HM Revenue and Customs (HMRC). You SHOULD NOT address money laundering or the possibility of penalties, as I have already spoken to Claire about these matters.

Tax manager

(c) Plad Ltd – unreported chargeable gain. (5 marks)

Your manager has had a meeting with Wanda, a client of your firm. Extracts from the memorandum prepared by your manager following the meeting, together with an email detailing the work he requires you to do, are set out below.

Extracts from the memorandum prepared by your manager – dated 3 December 2018

Wanda has not been employed since 31 December 2012 and has not received any taxable income since that date.

Income tax refund
Wanda has received an unexpected refund of income tax from HM Revenue and Customs (HMRC) in respect of the tax year 2011/12.

Email from your manager – dated 4 December 2018

Please prepare the following notes and calculations for use in a meeting with Wanda.

(d) Income tax refund
Prepare a summary of the actions which we should take, and the matters of which Wanda should be aware, in relation to the income tax refund.

Tax manager

Required:
Prepare the notes for use in a meeting with Wanda as requested in the email from your manager. The following marks are available:

(d) Income tax refund. (5 marks)

Professional marks will be awarded for the approach taken to problem solving, the clarity of the explanations and calculations, the effectiveness with which the information is communicated, and the overall presentation and style of the notes. (4 marks)

Your manager has had a meeting with Florina and Kanzi who are clients of your firm. Florina’s father, Winston, also attended the meeting. The notes prepared following the meeting and an email from your manager setting out the work he requires you to do are set out below.

Email from your manager – dated 7 September 2017
Please carry out the following work.

Required: Carry out the work requested in the email from your manager. The following marks are available:

(c) Becoming Winston’s tax adviser.           (5 marks)

Your manager has had a meeting with the finance director of Hahn Ltd, which is a client of your firm. Extracts fromthe memorandum she prepared following the meeting, and an email from her in connection with the Hahn Ltd groupare set out below:

Required: Prepare the memorandum as requested in the email from your manager. The following marks are available:

(c) Chad Ltd – refund of VAT.            (5 marks)

Your manager has had a meeting with Jonny who is establishing a new business. An extract from an email from your manager, a schedule and a computation are set out below.

Extract from the email from your manager

Jonny was born in 1968. His new business will begin trading on 1 November 2015. Jonny will use an inheritance he received following the death of his mother to finance this new venture. We have been asked to advise Jonny on his business and his inheritance. Some of the work has already been done; I want you to complete it.

Please prepare a memorandum for Jonny's client file addressing the following issues:

iii) New contracts for the business 
Jonny is hoping to obtain contracts with local educational establishments and has asked us to help. One of our clients is a college and an ex-client of ours provided services to a number of schools and colleges. Accordingly, we have knowledge and experience in this area.

Explain the extent to which it is acceptable for us to use the knowledge we have gained in respect of our existing client and ex-client to assist Jonny.

Tax manager

(iii) New contracts for the business.           (5 marks)

Your manager has had a number of telephone conversations with Gomez, a potential new client. Gomez owns the whole of the ordinary share capital of Helm Ltd. Extracts from the memorandum prepared by your manager setting out the matters discussed and an email from your manager in connection with the Helm Ltd group are set out below.

Email from your manager 
Additional information
1. All of the companies are UK resident trading companies. 
2. All of the companies are profitable and prepare accounts to 31 March each year.

Please carry out the following work in preparation for a meeting with Gomez.

(d) Becoming tax advisers to Gomez and the Helm Ltd group of companies
Prepare a summary of the information we require, and any actions which we should take before we agree to become tax advisers to Gomez and the Helm Ltd group of companies.

Tax manager

(d) Becoming tax advisers to Gomez and the Helm Ltd group of companies.               (5 marks)

Your manager has had a meeting with Kantar. Kantar recently appointed your firm to be his tax advisers. Extracts from the memorandum recording the matters discussed at the meeting and from an email from your manager are set out below.

Extract from an email from your manager

Please prepare notes for use in a meeting with Kantar. The notes should address the following issues:

(c) Reporting of chargeable gains
Kantar does not intend to report his chargeable gains on his income tax return as he believes that the tax authorities should be able to obtain this information from other sources. Explain the implications for Kantar, and our firm, of Kantar failing to report the chargeable gains to HM Revenue and Customs.

Tax manager

Required: Prepare the meeting notes requested in the email from your manager. The following marks are available:

(c) Reporting of chargeable gains.           (4 marks)

Email from your manager

Please carry out the following work in preparation for the Opus Ltd meeting.

Required:

Your manager has had a meeting with Farina and Lauda, potential new clients, who are partners in the FL Partnership.
The memorandum recording the matters discussed, together with an email from your manager, is set out below.

Memorandum

To           The files
From      Tax manager
Date       5 December 2013
Subject   FL Partnership

Background

Farina and Lauda began trading as the FL Partnership on 1 May 2008. Accounts have always been prepared to 31 March each year. They are each entitled to 50% of the revenue profits and capital profits of the business.

On 1 March 2014, the whole of the FL Partnership business will be sold as a going concern to JH plc, a quoted trading company. The consideration for the sale will be a mixture of cash and shares. Capital gains tax relief on the transfer of a business to a company (incorporation relief) will be available in respect of the sale.

Farina and Lauda will both pay income tax at the additional rate in the tax year 2013/14 and anticipate continuing to do so in future years. They are very wealthy individuals, who use their capital gains tax annual exempt amounts every year. Both of them are resident, ordinarily resident and domiciled in the UK.

Required:
(a) It is anticipated that Farina and Lauda will require some highly sophisticated and specialised tax planning work in the future.

Prepare a summary of the information which would be required, together with any action(s) which should be taken by the firm before it agrees to become the tax advisers to Farina and Lauda. (5 marks)

Your manager has had a telephone conversation with Burt, the Group Finance Director of the Epon Ltd group of companies. Extracts from both a memorandum and an email from your manager are set out below.

Extract from a memorandum from your manager

On Thursday 6 June I spoke to Burt, the Group Finance Director of Epon Ltd. He is coming to the office on Monday to appoint us as tax advisers to the group, and possibly to the individual directors, and to discuss the group’s affairs.

The Epon Ltd group
Epon Ltd is owned by a large number of unrelated individuals. Epon Ltd owns 100% of the ordinary share capital of Wahzah Ltd, Yoko Ltd and NewCo Ltd. All four companies are UK resident and prepare accounts to 30 June each year. It is the policy of the group to maximise the tax saved when relieving losses and only to carry losses forward if there is no alternative relief available.

The purchase of the Aquapower business
NewCo Ltd is currently dormant. It was incorporated on 1 May 2013 in order to purchase the assets of the Aquapower business (Aquapower) from an unincorporated trader. It was intended that NewCo Ltd would purchase Aquapower on 1 July 2013. However, Burt has now decided that he would prefer the business to be purchased by Yoko Ltd, provided that this is not more expensive from a tax point of view. Under this option, Yoko Ltd would then be carrying on two separate trades.

Aquapower’s business is the distribution of bottled drinks. The budgeted trading profit of Aquapower for the year ending 30 June 2014 is £60,000. None of the assets of the Aquapower business qualifies for rollover relief.

The purchase of equipment from the country of Candara
A new supplier of equipment for the fitness clubs has been identified in Candara. Wahzah Ltd intends to purchase equipment from this supplier in July 2013. The country of Candara is not a member of the European Union.

The purchase of Kari’s shares
The planned changes to the Epon Ltd group have resulted in a dispute with Kari, the Group Sales Director. In order to resolve this, it has been proposed that Epon Ltd will carry out a purchase of its own shares on 31 July 2013 and acquire the whole of Kari’s shareholding.

Kari subscribed £10,000 for 10,000 £1 ordinary shares in Epon Ltd on 1 December 2008. It has been agreed that Epon Ltd will purchase all of these shares on 31 July 2013 for £90,000. Kari has been advised that the money she will receive will be treated as a dividend. Kari’s annual taxable employment income (before deducting her personal allowance) is £72,000. In the tax year 2013/14, she will not receive any other income or make any disposals for the purposes of capital gains tax.

Extract from an email from your manager

Please prepare a memorandum for the client file that addresses the following issues:

(d) Appointment as tax advisers
An explanation of whether or not it is acceptable for the firm to be appointed tax advisers to the companies’ directors as well as to the Epon Ltd group of companies. On the assumption that it is acceptable, outline any safeguards that the firm should consider in relation to this joint appointment.

Tax manager

Required:
Prepare the memorandum requested in the email from your manager. The following marks are available.
(d) Appointment as tax advisers. (5 marks)

Professional marks will be awarded in question 1 for adopting a logical approach to problem solving, the clarity of the calculations, effectiveness with which the information is communicated, and the overall presentation of the memorandum. (4 marks)