THE CHARTERED INSTITUTE OF TAXATION
APPLICATION AND PROFESSIONAL SKILLS
Taxation of Larger Companies and Groups
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 a tax manager at NGH LLP, tax advisers to Novic Ltd.
Novic Ltd is a UK incorporated and tax resident company. It is owned by a consortium of three UK tax
resident companies, Alpha plc, Beta plc and Gamma Ltd. The consortium members own, in equal
amounts, all of the share capital of Novic Ltd.
Your tax partner, Delia Bistung, recently attended a meeting with the Chief Financial Officer of Novic Ltd,
Bill Jones, and has just received a follow-up letter requesting tax advice. Delia has asked you to draft a
report as requested in Bill’s letter.
The following exhibits are provided to assist you:
EXHIBIT A: Note of meeting between Delia Bistung and Bill Jones
EXHIBIT B: Letter from Biopharma Inc to Novic Ltd
EXHIBIT C: Letter from Bill Jones to Delia Bistung
EXHIBIT D: Pre-seen information
Requirement
Prepare a draft report to Novic Ltd on the implications of the options to resolve the dispute, as set
out in Bill Jones’ letter, and recommend how to proceed.
Continued
Page 2 of 8 APS TOLC
,Continuation
EXHIBIT A
Note of meeting between Delia Bistung and Bill Jones
Date: 26 April 2022
Present: Bill Jones (CFO, Novic Ltd)
Delia Bistung (Tax partner, NGH LLP)
Subject: Dispute with CHB Ltd
Bill explained that since the end of last year, Novic Ltd has been in dispute with a competitor company,
CHB Ltd.
CHB Ltd alleges that Novic Ltd has used (and continues to use), without permission, their intellectual
property to develop a new drug (Drug B). This drug, although not yet approved for sale, has the potential
for significant global sales and profits. CHB Ltd is seeking damages of £150 million as compensation for
sales which they could have otherwise generated by creating the drug themselves or licensing their
intellectual property. Novic Ltd has not accepted that compensation is due so CHB Ltd has started legal
action. A court hearing is scheduled for late July 2022, with judgement expected shortly thereafter. Legal
advice suggests that CHB Ltd has a more than 50 percent chance of success if the matter proceeds to
court.
Bill explained that an offer to settle had recently been received from CHB Ltd’s parent company,
Biopharma Inc, and he provided a copy of the letter setting this out (EXHIBIT B). Whilst CHB Ltd claim
significant compensation, they also recognise that Novic Ltd’s own research and work on its drugs has
significant value and so they are interested in acquiring Novic Ltd.
Bill has undertaken some research on CHB Ltd. CHB Ltd is tax resident and registered in Utopia, a
Caribbean tax haven country. It is a wholly-owned subsidiary company of Biopharma Inc, which is tax
resident in the USA. Biopharma Inc is the parent company of a multinational group. The group undertakes
pharmaceutical research, and produces and sells drugs used to treat a variety of medical conditions. The
intellectual property created by the research activities is protected by patents filed in numerous countries,
with most of that intellectual property owned by CHB Ltd.
Biopharma Inc has a single wholly-owned UK tax resident subsidiary company, Biop (UK) Ltd. That
company distributes drugs and has consistently reported annual profits of £5 million for the past five years.
Bill would like us to advise on how to proceed and he said that he would write to us in a few days with
some further information once the Board had discussed potential options (EXHIBIT C).
Continued
Page 3 of 8 APS TOLC
, Continuation
EXHIBIT B
Letter from Biopharma Inc to Novic Ltd
The Board of Directors Biopharma Inc
Novic Ltd Los Angeles
Camford Science Park USA
Camford
CB99 9ZZ
April 19, 2022
Dear Sirs
Dispute with CHB Ltd – without prejudice and subject to contract
Further to earlier correspondence in this matter, Biopharma Inc and CHB Ltd would be willing to settle the
current dispute on one of the following terms:
1) An immediate payment of £100 million in cash to CHB Ltd with Novic Ltd entering into an arms’ length
royalty agreement for future use of the intellectual property; or
2) Biopharma Inc will buy, subject to due diligence, all of the share capital of Novic Ltd for £300 million,
and the intellectual property dispute would be dropped; or
3) Biopharma Inc will buy, subject to due diligence, all of the share capital of Novic Ltd for £400 million,
but with a prior cash payment to CHB Ltd by Novic Ltd of £100 million to settle the intellectual property
dispute.
The consideration payable by Biopharma Inc under options 2 and 3 above would be increased by the tax
value of losses brought forward and any deductions obtained for an intellectual property settlement figure,
once agreed by HMRC.
Biopharma Inc is not willing to buy less than 100% of the share capital of Novic Ltd.
Yours faithfully
Chief Financial Officer
Biopharma Inc
Continued
Page 4 of 8 APS TOLC
APPLICATION AND PROFESSIONAL SKILLS
Taxation of Larger Companies and Groups
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 a tax manager at NGH LLP, tax advisers to Novic Ltd.
Novic Ltd is a UK incorporated and tax resident company. It is owned by a consortium of three UK tax
resident companies, Alpha plc, Beta plc and Gamma Ltd. The consortium members own, in equal
amounts, all of the share capital of Novic Ltd.
Your tax partner, Delia Bistung, recently attended a meeting with the Chief Financial Officer of Novic Ltd,
Bill Jones, and has just received a follow-up letter requesting tax advice. Delia has asked you to draft a
report as requested in Bill’s letter.
The following exhibits are provided to assist you:
EXHIBIT A: Note of meeting between Delia Bistung and Bill Jones
EXHIBIT B: Letter from Biopharma Inc to Novic Ltd
EXHIBIT C: Letter from Bill Jones to Delia Bistung
EXHIBIT D: Pre-seen information
Requirement
Prepare a draft report to Novic Ltd on the implications of the options to resolve the dispute, as set
out in Bill Jones’ letter, and recommend how to proceed.
Continued
Page 2 of 8 APS TOLC
,Continuation
EXHIBIT A
Note of meeting between Delia Bistung and Bill Jones
Date: 26 April 2022
Present: Bill Jones (CFO, Novic Ltd)
Delia Bistung (Tax partner, NGH LLP)
Subject: Dispute with CHB Ltd
Bill explained that since the end of last year, Novic Ltd has been in dispute with a competitor company,
CHB Ltd.
CHB Ltd alleges that Novic Ltd has used (and continues to use), without permission, their intellectual
property to develop a new drug (Drug B). This drug, although not yet approved for sale, has the potential
for significant global sales and profits. CHB Ltd is seeking damages of £150 million as compensation for
sales which they could have otherwise generated by creating the drug themselves or licensing their
intellectual property. Novic Ltd has not accepted that compensation is due so CHB Ltd has started legal
action. A court hearing is scheduled for late July 2022, with judgement expected shortly thereafter. Legal
advice suggests that CHB Ltd has a more than 50 percent chance of success if the matter proceeds to
court.
Bill explained that an offer to settle had recently been received from CHB Ltd’s parent company,
Biopharma Inc, and he provided a copy of the letter setting this out (EXHIBIT B). Whilst CHB Ltd claim
significant compensation, they also recognise that Novic Ltd’s own research and work on its drugs has
significant value and so they are interested in acquiring Novic Ltd.
Bill has undertaken some research on CHB Ltd. CHB Ltd is tax resident and registered in Utopia, a
Caribbean tax haven country. It is a wholly-owned subsidiary company of Biopharma Inc, which is tax
resident in the USA. Biopharma Inc is the parent company of a multinational group. The group undertakes
pharmaceutical research, and produces and sells drugs used to treat a variety of medical conditions. The
intellectual property created by the research activities is protected by patents filed in numerous countries,
with most of that intellectual property owned by CHB Ltd.
Biopharma Inc has a single wholly-owned UK tax resident subsidiary company, Biop (UK) Ltd. That
company distributes drugs and has consistently reported annual profits of £5 million for the past five years.
Bill would like us to advise on how to proceed and he said that he would write to us in a few days with
some further information once the Board had discussed potential options (EXHIBIT C).
Continued
Page 3 of 8 APS TOLC
, Continuation
EXHIBIT B
Letter from Biopharma Inc to Novic Ltd
The Board of Directors Biopharma Inc
Novic Ltd Los Angeles
Camford Science Park USA
Camford
CB99 9ZZ
April 19, 2022
Dear Sirs
Dispute with CHB Ltd – without prejudice and subject to contract
Further to earlier correspondence in this matter, Biopharma Inc and CHB Ltd would be willing to settle the
current dispute on one of the following terms:
1) An immediate payment of £100 million in cash to CHB Ltd with Novic Ltd entering into an arms’ length
royalty agreement for future use of the intellectual property; or
2) Biopharma Inc will buy, subject to due diligence, all of the share capital of Novic Ltd for £300 million,
and the intellectual property dispute would be dropped; or
3) Biopharma Inc will buy, subject to due diligence, all of the share capital of Novic Ltd for £400 million,
but with a prior cash payment to CHB Ltd by Novic Ltd of £100 million to settle the intellectual property
dispute.
The consideration payable by Biopharma Inc under options 2 and 3 above would be increased by the tax
value of losses brought forward and any deductions obtained for an intellectual property settlement figure,
once agreed by HMRC.
Biopharma Inc is not willing to buy less than 100% of the share capital of Novic Ltd.
Yours faithfully
Chief Financial Officer
Biopharma Inc
Continued
Page 4 of 8 APS TOLC
