THE CHARTERED INSTITUTE OF TAXATION
APPLICATION AND PROFESSIONAL SKILLS
VAT and Other Indirect Taxes
May 2022
TIME ALLOWED
3 HOURS 30 MINUTES
• In order to secure a pass in this exam, you will be required to demonstrate competence in each of
three skills.
You will be assessed across your answer as a whole for Structure. A pass or fail grade will be
awarded.
You will be assessed for competence in a number of broad topics for the following skills:
➢ Identification and Application
➢ Relevant Advice and Substantiated Conclusions
For each topic for each of these two skills, a grade will be awarded. The grades for those topics will
be weighted and averaged to produce a final grade for each skill of 0, 1, 2, 3 or 4. A grade of 3 or 4
is required to demonstrate competence.
• All workings should be shown and made to the nearest month and pound unless the question specifies
otherwise.
• Candidates who answer any law elements in this paper in accordance with Scots law or Northern
Ireland law should indicate this where relevant.
• Scots law candidates may provide answers referring to Land and Buildings Transaction Tax rather
than Stamp Duty Land Tax.
• Unless otherwise indicated by the provision of additional information in the question, you may assume
that 2021/22 legislation (including rates and allowances) continues to apply for 2022/23 and future
years. Candidates answering by reference to more recently enacted legislation or tax cases will not
be penalised.
• You must type your answer in the space on the screen as indicated by the Exam4 guidance.
,You are Derya Tarhan, tax manager at Kavak LLP, a firm of Chartered Tax Advisers. You have received
a letter (EXHIBIT A) from Debbie Harriday, who has recently become a client of the firm. Debbie carries
on business as a self-employed mobile hairdresser, providing her services to clients in their own homes,
or at care homes where they are long-term residents.
Debbie has received a proposal (EXHIBIT B) from David Blacklock, Development Director of Curabimus
plc, which operates the care homes where some of Debbie’s clients live. Curabimus plc is constructing a
new Extra Care Unit, called “Wychwood”. “Wychwood” will include a cafeteria/restaurant and a Personal
Care Suite comprising a hair salon (with two chairs) and a separate beauty treatment room. Curabimus
plc are proposing that Debbie takes a lease of the whole suite. They have in mind she will provide her
own hairdressing services using one of the chairs. They are also willing for her to make appropriate
arrangements for the second chair and for the beauty treatment room.
Debbie’s civil partner, Joanne, is a self-employed beautician. Debbie is considering how best to involve
Joanne in the venture. Joanne’s sister, Merle, is also a hairdresser, who is seeking a new position. Joanne
has provided some financial information for herself and Merle (EXHIBIT C).
The following exhibits are provided to assist you:
EXHIBIT A: Letter from Debbie Harriday
EXHIBIT B: Letter from David Blacklock, Development Director of Curabimus plc
EXHIBIT C: Note from Joanne Baptiste
EXHIBIT D: Pre-seen information
Requirement:
Write a letter to Debbie recommending an appropriate business structure if she accepts
Curabimus plc’s proposal and advising on the involvement of Joanne and the use of the second
chair by Merle.
Continued
Page 2 of 6 APS VAT
,Continuation
EXHIBIT A
Letter from Debbie Harriday
Derya Tarhan Flat 6, Crest House
Kavak LLP Cutters Lane
Abacus House Thatchford
Ledger Street Barnetshire
Barnet Magna BE22 4XY
BE1 3DD
3 May 2022
Dear Derya
I hope this finds you well.
A business opportunity has come along on which I need your advice and recommendations.
I enclose a letter from David Blacklock, of Curabimus plc (EXHIBIT B), which explains what they propose.
The new personal care suite will have two hairdressing chairs and a separate beauty treatment room. The
lease that they are thinking of offering me seems very attractive. Once “Wychwood” is fully occupied, my
clientele and turnover could potentially increase by 50%, as Curabimus plc would also allow me to offer
services to non-residents. One worry is that I won’t be able to work full-time in the salon and also look
after my other clients. Joanne had the brilliant idea of asking her sister, Merle, to come and provide
hairdressing from the second chair. But I’m not sure what kind of arrangement I should consider offering
her.
Since getting together, Joanne and I have often talked of pooling our talents and maybe going into
business together. She is a mobile beautician and, like me, self-employed. A few of her clients are
residents in the care homes, but most are younger women who live in their own homes. She wants to
increase her clientele and the new beauty room at Wychwood seems a golden opportunity for her. I am
wondering, therefore, whether we should continue to run our separate businesses or whether, at some
point, we should join them together. I would like your advice on what kind of business arrangements we
should consider.
If it helps you, I estimate that currently about half my turnover comes from residents in the care homes.
The rest of my turnover comes from clients I visit in their own homes. I do all my own bookings by phone
or by text. I estimate that, if I keep my prices the same, the new salon could potentially increase overall
turnover by 50% once “Wychwood” is fully occupied. The fit-out of the personal care suite is expected to
cost around £20,000 plus VAT, but Curabimus plc have offered to contribute £15,000. I attach a note
(EXHIBIT C) provided by Joanne, giving more information about her and Merle.
I’m sure there will be lots of tax issues to consider. Before deciding how to go forward, I would welcome
your advice and recommendations.
I look forward to hearing from you.
Yours sincerely
Debbie
Continued
Page 3 of 6 APS VAT
, Continuation
EXHIBIT B
Letter from David Blacklock, Development Director of Curabimus plc
Ms Debbie Harriday Curabimus plc
Flat 6, Crest House Chronos House
Cutters Lane The Plaza
Thatchford Eskleap
Barnetshire EK5 6TT
BE22 4XY
25 April 2022
Dear Debbie
Development of Wychwood
It was a pleasure to meet with you last week and discuss our new Extra Care Unit (“Wychwood”).
As you are aware, work on the project is almost complete. Wychwood will offer accommodation for up to
100 new residents. The building will benefit from the most up-to-date facilities and will include, on the
ground floor, a cafeteria/restaurant. We are in negotiation with a leading firm of caterers to operate this.
Also, on the ground floor, there will be a personal care suite, which will comprise a hairdressing salon,
with two hairdressing chairs, and a separate beauty treatment room. Our residents speak very highly of
your services. We should, therefore, like to offer you the opportunity to take a lease of the personal care
suite (subject to contract). Before drawing up formal Heads of Terms, I thought I should write summarising
what we discussed.
1) The lease of the personal care suite would be for a 15-year term, commencing in June 2022.
2) The annual rent will be £5,500, plus a service charge (estimated at £500 per annum). We will allow
a rent-free period of 24 months. Rent reviews (upwards only) will be at five-yearly intervals, the first
such review on 25 June 2027.
3) The salon is to be fully fitted-out by you (to specifications as discussed and already agreed with us)
and completed by the end of July 2022. On your entering into the lease, we will pay you a
contribution of £15,000 towards the cost of these works.
4) We would require you to give booking priority to residents of “Wychwood” and personally to provide
hairdressing services from one of the chairs in the salon. However, you would be free to make your
own arrangements in relation to the second chair and for operation of the beauty treatment room
(subject to our approving such arrangements). You would also be free to offer hair and beauty
products for sale from the premises.
5) No employment relationship is created between you (including any third party) and Curabimus plc,
nor will either party act as the agent or independent contractor of the other.
6) Curabimus plc has exercised the option to tax on Wychwood and will therefore charge VAT on the
rent and service charge, after the end of the rent-free period.
I hope you will find these proposals attractive.
I look forward to hearing your thoughts, so we can proceed in drawing up the formal Heads of Terms and
the Lease documentation.
Yours sincerely
David
David Blacklock
Development Director
Continued
Page 4 of 6 APS VAT
APPLICATION AND PROFESSIONAL SKILLS
VAT and Other Indirect Taxes
May 2022
TIME ALLOWED
3 HOURS 30 MINUTES
• In order to secure a pass in this exam, you will be required to demonstrate competence in each of
three skills.
You will be assessed across your answer as a whole for Structure. A pass or fail grade will be
awarded.
You will be assessed for competence in a number of broad topics for the following skills:
➢ Identification and Application
➢ Relevant Advice and Substantiated Conclusions
For each topic for each of these two skills, a grade will be awarded. The grades for those topics will
be weighted and averaged to produce a final grade for each skill of 0, 1, 2, 3 or 4. A grade of 3 or 4
is required to demonstrate competence.
• All workings should be shown and made to the nearest month and pound unless the question specifies
otherwise.
• Candidates who answer any law elements in this paper in accordance with Scots law or Northern
Ireland law should indicate this where relevant.
• Scots law candidates may provide answers referring to Land and Buildings Transaction Tax rather
than Stamp Duty Land Tax.
• Unless otherwise indicated by the provision of additional information in the question, you may assume
that 2021/22 legislation (including rates and allowances) continues to apply for 2022/23 and future
years. Candidates answering by reference to more recently enacted legislation or tax cases will not
be penalised.
• You must type your answer in the space on the screen as indicated by the Exam4 guidance.
,You are Derya Tarhan, tax manager at Kavak LLP, a firm of Chartered Tax Advisers. You have received
a letter (EXHIBIT A) from Debbie Harriday, who has recently become a client of the firm. Debbie carries
on business as a self-employed mobile hairdresser, providing her services to clients in their own homes,
or at care homes where they are long-term residents.
Debbie has received a proposal (EXHIBIT B) from David Blacklock, Development Director of Curabimus
plc, which operates the care homes where some of Debbie’s clients live. Curabimus plc is constructing a
new Extra Care Unit, called “Wychwood”. “Wychwood” will include a cafeteria/restaurant and a Personal
Care Suite comprising a hair salon (with two chairs) and a separate beauty treatment room. Curabimus
plc are proposing that Debbie takes a lease of the whole suite. They have in mind she will provide her
own hairdressing services using one of the chairs. They are also willing for her to make appropriate
arrangements for the second chair and for the beauty treatment room.
Debbie’s civil partner, Joanne, is a self-employed beautician. Debbie is considering how best to involve
Joanne in the venture. Joanne’s sister, Merle, is also a hairdresser, who is seeking a new position. Joanne
has provided some financial information for herself and Merle (EXHIBIT C).
The following exhibits are provided to assist you:
EXHIBIT A: Letter from Debbie Harriday
EXHIBIT B: Letter from David Blacklock, Development Director of Curabimus plc
EXHIBIT C: Note from Joanne Baptiste
EXHIBIT D: Pre-seen information
Requirement:
Write a letter to Debbie recommending an appropriate business structure if she accepts
Curabimus plc’s proposal and advising on the involvement of Joanne and the use of the second
chair by Merle.
Continued
Page 2 of 6 APS VAT
,Continuation
EXHIBIT A
Letter from Debbie Harriday
Derya Tarhan Flat 6, Crest House
Kavak LLP Cutters Lane
Abacus House Thatchford
Ledger Street Barnetshire
Barnet Magna BE22 4XY
BE1 3DD
3 May 2022
Dear Derya
I hope this finds you well.
A business opportunity has come along on which I need your advice and recommendations.
I enclose a letter from David Blacklock, of Curabimus plc (EXHIBIT B), which explains what they propose.
The new personal care suite will have two hairdressing chairs and a separate beauty treatment room. The
lease that they are thinking of offering me seems very attractive. Once “Wychwood” is fully occupied, my
clientele and turnover could potentially increase by 50%, as Curabimus plc would also allow me to offer
services to non-residents. One worry is that I won’t be able to work full-time in the salon and also look
after my other clients. Joanne had the brilliant idea of asking her sister, Merle, to come and provide
hairdressing from the second chair. But I’m not sure what kind of arrangement I should consider offering
her.
Since getting together, Joanne and I have often talked of pooling our talents and maybe going into
business together. She is a mobile beautician and, like me, self-employed. A few of her clients are
residents in the care homes, but most are younger women who live in their own homes. She wants to
increase her clientele and the new beauty room at Wychwood seems a golden opportunity for her. I am
wondering, therefore, whether we should continue to run our separate businesses or whether, at some
point, we should join them together. I would like your advice on what kind of business arrangements we
should consider.
If it helps you, I estimate that currently about half my turnover comes from residents in the care homes.
The rest of my turnover comes from clients I visit in their own homes. I do all my own bookings by phone
or by text. I estimate that, if I keep my prices the same, the new salon could potentially increase overall
turnover by 50% once “Wychwood” is fully occupied. The fit-out of the personal care suite is expected to
cost around £20,000 plus VAT, but Curabimus plc have offered to contribute £15,000. I attach a note
(EXHIBIT C) provided by Joanne, giving more information about her and Merle.
I’m sure there will be lots of tax issues to consider. Before deciding how to go forward, I would welcome
your advice and recommendations.
I look forward to hearing from you.
Yours sincerely
Debbie
Continued
Page 3 of 6 APS VAT
, Continuation
EXHIBIT B
Letter from David Blacklock, Development Director of Curabimus plc
Ms Debbie Harriday Curabimus plc
Flat 6, Crest House Chronos House
Cutters Lane The Plaza
Thatchford Eskleap
Barnetshire EK5 6TT
BE22 4XY
25 April 2022
Dear Debbie
Development of Wychwood
It was a pleasure to meet with you last week and discuss our new Extra Care Unit (“Wychwood”).
As you are aware, work on the project is almost complete. Wychwood will offer accommodation for up to
100 new residents. The building will benefit from the most up-to-date facilities and will include, on the
ground floor, a cafeteria/restaurant. We are in negotiation with a leading firm of caterers to operate this.
Also, on the ground floor, there will be a personal care suite, which will comprise a hairdressing salon,
with two hairdressing chairs, and a separate beauty treatment room. Our residents speak very highly of
your services. We should, therefore, like to offer you the opportunity to take a lease of the personal care
suite (subject to contract). Before drawing up formal Heads of Terms, I thought I should write summarising
what we discussed.
1) The lease of the personal care suite would be for a 15-year term, commencing in June 2022.
2) The annual rent will be £5,500, plus a service charge (estimated at £500 per annum). We will allow
a rent-free period of 24 months. Rent reviews (upwards only) will be at five-yearly intervals, the first
such review on 25 June 2027.
3) The salon is to be fully fitted-out by you (to specifications as discussed and already agreed with us)
and completed by the end of July 2022. On your entering into the lease, we will pay you a
contribution of £15,000 towards the cost of these works.
4) We would require you to give booking priority to residents of “Wychwood” and personally to provide
hairdressing services from one of the chairs in the salon. However, you would be free to make your
own arrangements in relation to the second chair and for operation of the beauty treatment room
(subject to our approving such arrangements). You would also be free to offer hair and beauty
products for sale from the premises.
5) No employment relationship is created between you (including any third party) and Curabimus plc,
nor will either party act as the agent or independent contractor of the other.
6) Curabimus plc has exercised the option to tax on Wychwood and will therefore charge VAT on the
rent and service charge, after the end of the rent-free period.
I hope you will find these proposals attractive.
I look forward to hearing your thoughts, so we can proceed in drawing up the formal Heads of Terms and
the Lease documentation.
Yours sincerely
David
David Blacklock
Development Director
Continued
Page 4 of 6 APS VAT
