Capital gains tax and inheritance tax issues , Taxation

Background information

Jim set up a limited company; Show the Way Limited (The Company), along with his father in 1983. The company is incorporated in Scotland and has been registered for VAT since December 1983. It provides temporary traffic signs directing attendees to a range of sporting and other events. Jim now owns 100% of the company shares.

Jim is married to Jean, they are both UK resident and domiciled for tax purposes. They have a 20 year old daughter Liz, who is studying mechanical engineering at the University of Glasgow. Liz has no contractual relationship with the company.

Facts

The company makes up accounts to 31st March each year. The accounts for the year ended 31st March 2012 have been completed and the company secretary (a part qualified accountant) has produced a corporation tax computation which produces a profit chargeable to corporation tax of £1,400,000. You review his papers and conclude that he has not considered any of the taxation consequences of the following transactions: -

1 The company paid a parking fine of £60 incurred by Jim when he parked outside the local off-sales on his way home from work.

2 The company has a contract with a telecommunications supplier under which it rents 90 mobile telephones. These are made available to employees who can use them for both business and personal calls. One of the mobile telephones is used by Liz.

3 The company met the cost of re-furnishing Jim's holiday cottage on Skye at a cost of £40,000 plus any applicable VAT. There is a written agreement stating that the furniture remains the property of the company and will be sold by the company in 2025.

4 The company purchased 30 lap top computers at a total cost of £25,000 plus any applicable VAT. These computers were immediately donated to a charitable youth organisation for use in a programme to increase IT awareness in disadvantaged areas.

5 The company has claimed a deduction for corporation tax for a bonus of £500,000 payable to Jim as a reward for his work in achieving a record profit in the year ended 31st March 2012. Jim has told you that he does not intend to draw the bonus from the company until 2016 at the earliest.

Jim asks you for taxation advice on the following transactions which are likely to occur in the year ended 31st March 2013.

1 The company intends to entertain 50 of its major customers and 10 senior employees at the London Olympics. The company will purchase a hospitality package at a cost of £500 plus any applicable VAT for each participant. As part of the deal, the hospitality provider will arrange a banner advertising the company on the front of the hospitality suite, in full view of TV cameras at the men's 100 metre final.

2 The company has been awarded a contract to provide temporary traffic signage for an international tax conference in Cannes (France.) The conference is being organised by a major Paris (France) law firm.

Jean spends a much of her time at the holiday home in Skye. She started a business activity on 1st January 2011 to occupy her time. She has developed a process to encapsulate dead midges (she purchases these from a local caravan park) into acrylic paperweights which she sells through local tourist shops. Her sales amounted to £5,000 per month from January 2011 to June 2011 and then increased to £15,000 per month; they have remained at that level since July 2011. The acrylic moulding equipment cost £20,000 plus any applicable VAT. She works in the garage attached to the holiday home. Liz helped her during the summer and was paid £500 per week - Liz worked a 45 hour week. The paperweights are marketed at £20 each. A booklet about the history of the midge (which can be purchased separately for £2) is included with each paperweight. She has not taken any advice regarding the VAT and Income Tax aspects of this venture as she thinks it is a hobby.

Required

Assume you are a tax lawyer who has been engaged to prepare a report commenting, by reference to all appropriate sources of tax law and practice, on all actual or potential tax implications arising from the specific information contained in the FACTS section outlined above. Your report should focus on:

1 Any actual or potential UK Value Added Tax implications for the company and Jean

2 Any actual or potential UK income tax implications for Jim, Jean and Liz.

3 Any actual or potential UK Corporation Tax implications for the company.

Please note that any Stamp Duty Land Tax, Capital Gains Tax and Inheritance Tax issues should be ignored as these will be examined as part of the Property Law course

 

Posted Date: 2/18/2013 12:05:43 AM | Location : United States







Related Discussions:- Capital gains tax and inheritance tax issues , Assignment Help, Ask Question on Capital gains tax and inheritance tax issues , Get Answer, Expert's Help, Capital gains tax and inheritance tax issues Discussions

Write discussion on Capital gains tax and inheritance tax issues
Your posts are moderated
Related Questions
John and Ellen Brite are married and file a joint return. John owns an unincorporated specialty electrical lightning retail store, Brite-On had the following assets on January 1, 2

"Alfred E. Old and Beulah A. Crane, each age 42, married on September 7, 2010. Alfred and Beulah will file a joint return for 2011. Alfred''''s Social Security number is 111-11-111

Several years ago, Magdelena purchased a new residence for $300,000. Currently, the outstanding mortgage on the residence is $260,000. The current fair value of the home is $330,00

Given the following set of facts, what is the net amount of cash received by the seller ? The seller records a credit sale for $1,000.  Shortly after the sale, the buyer retu

a.  Which type of ripple marks would you expect to see on the bed of a river? Why? b.  Which type would you expect to find on the floor of a standing body of water? Why? c.

Jenny is 35 years of age, single and is a professional hairdresser. She was born in Australia, however she often travels overseas for extended periods for work purposes. Jenny rec

Utilize Okun's law to answer the questions below;  u t  - u t-1  = -0.4(g yt  - 3%) Assuming u t-1  = 7% a. Calculate the change in u (u t  - u t-1 ) for each of the followin

Chris married Gina on February 1, 2012, and they became the proud parents of twins just in time for Christmas. Their Adjusted Gross Income (AGI) for 2012 was $75,000, and their ite


The Diamond Glitter Company is in the process of preparing its financial statements for 2012. Assume that no entries for depreciation have been recorded in 2012. The following info