THE CHARTERED INSTITUTE OF TAXATION
ADVANCED TECHNICAL
Taxation of Individuals
November 2021
TIME ALLOWED
3 HOURS 30 MINUTES
• 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.
• Except as set out below or indicated by additional information in the question, you may assume that
2020/21 legislation (including rates and allowances) continues to apply for 2021/22 and future years.
1) You MUST assume that the UK remains within the European Union.
2) You MUST ignore all temporary Covid related legislation including furlough, grants, loans and the
reductions in VAT and SDLT rates.
Except in relation to points 1) and 2) above, 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.
,1. Ruby Cole is a UK resident and UK domiciled individual living in England. She is single and her
son Alfie, who is 15, lives with her.
Ruby works full time for Flamingo Ltd. She is not a director of the company. Her salary for the
2020/21 tax year was £45,500. This was after sacrificing £6,000 per annum with effect from 6 April
2020 in exchange for a company car, which was provided on the same date.
Ruby’s P60 for 2020/21 shows that she paid tax at source on her salary of £6,600.
Ruby’s company car was first registered on 1 September 2019 and has a manufacturer’s list price
of £22,650. Flamingo Ltd paid £18,750 for the vehicle on 1 March 2020. During March 2020
Flamingo Ltd paid £565 for a set of alloy wheels for the vehicle. The vehicle has a petrol engine
and produces CO2 emissions of 102g/km. No fuel is provided for private use.
On 6 April 2020, Flamingo Ltd made a loan of £16,000 to Ruby. This was followed by a further loan
of £2,500 on 1 May 2020. Ruby has not made any repayments and was not required to pay any
interest. Ruby lent 75% of the money she borrowed from Flamingo Ltd to Peacock Ltd. The funds
were used to buy equipment for Peacock Ltd’s trade. Ruby owns 10% of the shares in Peacock
Ltd.
In November 2014, Flamingo Ltd awarded Ruby 50 shares in the company in recognition of her
outstanding performance. The only restriction attaching to the shares was forfeiture if she left
Flamingo Ltd’s employment within six years of the award. The restricted value of the shares in
November 2014 was £15 per share and the unrestricted market value was £29 per share. In
November 2020, following the lifting of the restriction, the market value of Ruby’s shares was £82
per share.
Ruby did not make any elections in respect of the shares in 2014.
Flamingo Ltd made an employer pension contribution of £7,000 for Ruby in March 2021. This was
the first contribution made into their workplace pension scheme for Ruby. Ruby did not make any
employee contributions into the scheme during 2020/21. The scheme is not a defined benefits
scheme.
In addition to her workplace pension, Ruby has a private pension. For the last few tax years, she
has made an annual contribution of £40,000 into this pension. The last time she contributed to this
pension was in December 2019. In May 2020 Ruby turned 55 and withdrew a lump sum of £5,000
from this pension, under a flexible drawdown arrangement. The value of the fund immediately prior
to the withdrawal was £456,000.
On 15 August 2020, Ruby purchased some treasury stock. The annual interest is £4,000, payable
quarterly on 30 April, 31 July, 31 October and 31 January. The ex-div dates are 20 April, 20 July,
20 October and 20 January.
Ruby makes a donation of £15 per month to a registered charity. Ruby has signed a gift aid
declaration in respect of this donation.
Ruby received child benefit of £20.70 per week during the 2020/21 tax year.
Alfie has two savings accounts as follows:
Account One: This account contains money gifted to Alfie by his Aunt. During 2020/21, gross
interest of £157 was credited to this account.
Account Two: This account contains money gifted to Alfie by Ruby. During 2020/21, gross interest
of £236 was credited to this account.
Requirement:
Calculate Ruby’s Income Tax payable for the year ended 5 April 2021. (20)
,2. Sarah is a UK domiciled individual who has always been UK resident and is a higher rate taxpayer.
In 2015/16, Sarah opened up an overseas bank account with £25,000. She did this because the
overseas bank was paying a better rate of interest than her UK bank. She then used some of this
money to acquire units in an offshore non-reporting fund to maximise her investment income.
In 2015/16 Sarah received interest of £750 from her overseas bank account. No overseas tax was
deducted. She also sold the units in the offshore non-reporting fund at a gain of £700. The proceeds
were paid into her overseas bank account.
In 2016/17, she used all of the remaining cash in the overseas bank account to acquire units in an
offshore reporting fund. She was entitled to income of £2,500 from the offshore reporting fund for
that year, but no payments were made to her from the fund in the 2016/17 year. However, it did
pay out this income in the 2017/18 year. The income for subsequent years was of a similar amount
and was always paid out in the following tax year. It was paid into her overseas bank account.
Sarah was not subject to any foreign tax in respect of either of her offshore funds. The Double Tax
Treaty in place with the country in which Sarah holds her investments follows the OECD Model
Treaty.
As Sarah considers her tax position to be straightforward, she has always completed her own tax
returns. She did not think that she had to declare anything relating to her foreign investments on
her UK tax return as they were kept outside the UK.
Requirement:
Explain how Sarah’s offshore investments should be taxed in the UK and the consequences
of not having reported the income. Calculations are NOT required.
(10)
3. Ayesha Patel is a UK resident and domiciled individual who is an additional rate taxpayer.
At 6 April 2020, Ayesha owned 100% of the share capital in three companies: Coconut Ltd, Mango
Ltd and Avocado Ltd.
Coconut Ltd and Mango Ltd are trading companies. Avocado Ltd is an investment company.
Coconut Ltd has large cash reserves and Ayesha plans to sell her shares in Mango Ltd to this
company for their market value, which is £346,000.
Ayesha has also agreed to sell 90% of her shares in Avocado Ltd to an unconnected third party for
£685,000.
Ayesha has used her Lifetime Allowance for Business Asset Disposal Relief in full.
Requirement:
Discuss the tax implications of Ayesha’s planned share transactions and recommend any
actions she should take. (15)
, 4. Oscar was born in Ruritania and is domiciled there.
He became UK resident for the first time on 6 April 2011 when he moved to London for his job. On
5 December 2014, he moved to Switzerland for a secondment. He was eligible for split year
treatment for 2014/15 with the overseas part of the year beginning on 5 December 2014.
He returned to the UK on 7 July 2017 to resume his duties in the UK. He was eligible for split year
treatment for 2017/18 with the UK part of the year beginning on 7 July 2017. He claimed the
remittance basis for 2017/18, 2018/19 and 2019/20.
Throughout 2020/21, Oscar was employed on an annual salary of £75,000. This was subject to
PAYE of £14,500 and was paid into his UK bank account at the end of each month.
In 2020/21 Oscar made net personal pension contributions of £3,000. He received UK bank interest
of £2,450 and UK dividend income of £2,320.
Oscar has a property in Ruritania and rents this out. The rent was £45,000 per annum until 30
November 2020 but increased to £60,000 per annum with effect from 1 December 2020. The rent
is payable monthly in advance on the 1st of the calendar month and is paid into one of Oscar’s
Ruritanian bank accounts.
During 2020/21 Oscar paid letting agency fees of £7,400, water charges of £1,200 and an insurance
premium of £7,000 for his Ruritanian property. Oscar uses the cash basis for calculating rental
profits in the UK. No Ruritanian tax is due on the rental income.
Oscar sold another Ruritanian residential property on 20 November 2020 for £250,000. The
property was acquired on 1 April 2010 for £40,000 for investment purposes, but Oscar never found
a tenant for this property. The property was worth £200,000 on 5 April 2017. No Ruritanian tax was
due on this sale.
Oscar has a Ruritanian current account (Account A) and three Ruritanian savings accounts
(Accounts B, C and D).
All Ruritanian rental income and interest is paid into Account A. Oscar has been using monies from
Account A to make gifts to his family members in Ruritania and in consequence this account is
overdrawn.
At 6 April 2020, Account B contained £30,000. This was made up of Swiss earnings arising when
he was non-resident. The proceeds of the sale of the property in November 2020 were paid into
this account. In December 2020, Oscar used all of the funds in Account B to make a gift to his 21
year old daughter, Lottie. He transferred the funds to her Ruritanian account. She then used the
fund as a deposit to acquire a UK property for her to live in by herself.
At 6 April 2020, Account C contained £60,000. This was made up of:
1) Ruritanian interest from a deposit maturity credited directly to this account in 2019/20. The
gross interest was £25,000 and Ruritanian tax of £5,000 had been deducted from this
amount.
2) A distribution from a Ruritanian discretionary trust of £40,000 that was paid to Oscar in
2018/19. This has not been subject to Ruritanian tax.
During 2020/21, Oscar transferred £12,000 from Account C to Account D.
At 6 April 2020, Account D had a balance of £90,000.
This was made up of:
1) Ruritanian dividend income which had arisen in 2014. The gross amount was £36,000 and
Ruritanian tax of £6,000 had been deducted from it.
2) A gift from Oscar’s father of £60,000 made in 2016.
There have been no other transactions in Accounts C or D since 6 April 2020.
Oscar is considering remitting £30,000 to the UK from one of his Ruritanian accounts.
Requirement:
ADVANCED TECHNICAL
Taxation of Individuals
November 2021
TIME ALLOWED
3 HOURS 30 MINUTES
• 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.
• Except as set out below or indicated by additional information in the question, you may assume that
2020/21 legislation (including rates and allowances) continues to apply for 2021/22 and future years.
1) You MUST assume that the UK remains within the European Union.
2) You MUST ignore all temporary Covid related legislation including furlough, grants, loans and the
reductions in VAT and SDLT rates.
Except in relation to points 1) and 2) above, 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.
,1. Ruby Cole is a UK resident and UK domiciled individual living in England. She is single and her
son Alfie, who is 15, lives with her.
Ruby works full time for Flamingo Ltd. She is not a director of the company. Her salary for the
2020/21 tax year was £45,500. This was after sacrificing £6,000 per annum with effect from 6 April
2020 in exchange for a company car, which was provided on the same date.
Ruby’s P60 for 2020/21 shows that she paid tax at source on her salary of £6,600.
Ruby’s company car was first registered on 1 September 2019 and has a manufacturer’s list price
of £22,650. Flamingo Ltd paid £18,750 for the vehicle on 1 March 2020. During March 2020
Flamingo Ltd paid £565 for a set of alloy wheels for the vehicle. The vehicle has a petrol engine
and produces CO2 emissions of 102g/km. No fuel is provided for private use.
On 6 April 2020, Flamingo Ltd made a loan of £16,000 to Ruby. This was followed by a further loan
of £2,500 on 1 May 2020. Ruby has not made any repayments and was not required to pay any
interest. Ruby lent 75% of the money she borrowed from Flamingo Ltd to Peacock Ltd. The funds
were used to buy equipment for Peacock Ltd’s trade. Ruby owns 10% of the shares in Peacock
Ltd.
In November 2014, Flamingo Ltd awarded Ruby 50 shares in the company in recognition of her
outstanding performance. The only restriction attaching to the shares was forfeiture if she left
Flamingo Ltd’s employment within six years of the award. The restricted value of the shares in
November 2014 was £15 per share and the unrestricted market value was £29 per share. In
November 2020, following the lifting of the restriction, the market value of Ruby’s shares was £82
per share.
Ruby did not make any elections in respect of the shares in 2014.
Flamingo Ltd made an employer pension contribution of £7,000 for Ruby in March 2021. This was
the first contribution made into their workplace pension scheme for Ruby. Ruby did not make any
employee contributions into the scheme during 2020/21. The scheme is not a defined benefits
scheme.
In addition to her workplace pension, Ruby has a private pension. For the last few tax years, she
has made an annual contribution of £40,000 into this pension. The last time she contributed to this
pension was in December 2019. In May 2020 Ruby turned 55 and withdrew a lump sum of £5,000
from this pension, under a flexible drawdown arrangement. The value of the fund immediately prior
to the withdrawal was £456,000.
On 15 August 2020, Ruby purchased some treasury stock. The annual interest is £4,000, payable
quarterly on 30 April, 31 July, 31 October and 31 January. The ex-div dates are 20 April, 20 July,
20 October and 20 January.
Ruby makes a donation of £15 per month to a registered charity. Ruby has signed a gift aid
declaration in respect of this donation.
Ruby received child benefit of £20.70 per week during the 2020/21 tax year.
Alfie has two savings accounts as follows:
Account One: This account contains money gifted to Alfie by his Aunt. During 2020/21, gross
interest of £157 was credited to this account.
Account Two: This account contains money gifted to Alfie by Ruby. During 2020/21, gross interest
of £236 was credited to this account.
Requirement:
Calculate Ruby’s Income Tax payable for the year ended 5 April 2021. (20)
,2. Sarah is a UK domiciled individual who has always been UK resident and is a higher rate taxpayer.
In 2015/16, Sarah opened up an overseas bank account with £25,000. She did this because the
overseas bank was paying a better rate of interest than her UK bank. She then used some of this
money to acquire units in an offshore non-reporting fund to maximise her investment income.
In 2015/16 Sarah received interest of £750 from her overseas bank account. No overseas tax was
deducted. She also sold the units in the offshore non-reporting fund at a gain of £700. The proceeds
were paid into her overseas bank account.
In 2016/17, she used all of the remaining cash in the overseas bank account to acquire units in an
offshore reporting fund. She was entitled to income of £2,500 from the offshore reporting fund for
that year, but no payments were made to her from the fund in the 2016/17 year. However, it did
pay out this income in the 2017/18 year. The income for subsequent years was of a similar amount
and was always paid out in the following tax year. It was paid into her overseas bank account.
Sarah was not subject to any foreign tax in respect of either of her offshore funds. The Double Tax
Treaty in place with the country in which Sarah holds her investments follows the OECD Model
Treaty.
As Sarah considers her tax position to be straightforward, she has always completed her own tax
returns. She did not think that she had to declare anything relating to her foreign investments on
her UK tax return as they were kept outside the UK.
Requirement:
Explain how Sarah’s offshore investments should be taxed in the UK and the consequences
of not having reported the income. Calculations are NOT required.
(10)
3. Ayesha Patel is a UK resident and domiciled individual who is an additional rate taxpayer.
At 6 April 2020, Ayesha owned 100% of the share capital in three companies: Coconut Ltd, Mango
Ltd and Avocado Ltd.
Coconut Ltd and Mango Ltd are trading companies. Avocado Ltd is an investment company.
Coconut Ltd has large cash reserves and Ayesha plans to sell her shares in Mango Ltd to this
company for their market value, which is £346,000.
Ayesha has also agreed to sell 90% of her shares in Avocado Ltd to an unconnected third party for
£685,000.
Ayesha has used her Lifetime Allowance for Business Asset Disposal Relief in full.
Requirement:
Discuss the tax implications of Ayesha’s planned share transactions and recommend any
actions she should take. (15)
, 4. Oscar was born in Ruritania and is domiciled there.
He became UK resident for the first time on 6 April 2011 when he moved to London for his job. On
5 December 2014, he moved to Switzerland for a secondment. He was eligible for split year
treatment for 2014/15 with the overseas part of the year beginning on 5 December 2014.
He returned to the UK on 7 July 2017 to resume his duties in the UK. He was eligible for split year
treatment for 2017/18 with the UK part of the year beginning on 7 July 2017. He claimed the
remittance basis for 2017/18, 2018/19 and 2019/20.
Throughout 2020/21, Oscar was employed on an annual salary of £75,000. This was subject to
PAYE of £14,500 and was paid into his UK bank account at the end of each month.
In 2020/21 Oscar made net personal pension contributions of £3,000. He received UK bank interest
of £2,450 and UK dividend income of £2,320.
Oscar has a property in Ruritania and rents this out. The rent was £45,000 per annum until 30
November 2020 but increased to £60,000 per annum with effect from 1 December 2020. The rent
is payable monthly in advance on the 1st of the calendar month and is paid into one of Oscar’s
Ruritanian bank accounts.
During 2020/21 Oscar paid letting agency fees of £7,400, water charges of £1,200 and an insurance
premium of £7,000 for his Ruritanian property. Oscar uses the cash basis for calculating rental
profits in the UK. No Ruritanian tax is due on the rental income.
Oscar sold another Ruritanian residential property on 20 November 2020 for £250,000. The
property was acquired on 1 April 2010 for £40,000 for investment purposes, but Oscar never found
a tenant for this property. The property was worth £200,000 on 5 April 2017. No Ruritanian tax was
due on this sale.
Oscar has a Ruritanian current account (Account A) and three Ruritanian savings accounts
(Accounts B, C and D).
All Ruritanian rental income and interest is paid into Account A. Oscar has been using monies from
Account A to make gifts to his family members in Ruritania and in consequence this account is
overdrawn.
At 6 April 2020, Account B contained £30,000. This was made up of Swiss earnings arising when
he was non-resident. The proceeds of the sale of the property in November 2020 were paid into
this account. In December 2020, Oscar used all of the funds in Account B to make a gift to his 21
year old daughter, Lottie. He transferred the funds to her Ruritanian account. She then used the
fund as a deposit to acquire a UK property for her to live in by herself.
At 6 April 2020, Account C contained £60,000. This was made up of:
1) Ruritanian interest from a deposit maturity credited directly to this account in 2019/20. The
gross interest was £25,000 and Ruritanian tax of £5,000 had been deducted from this
amount.
2) A distribution from a Ruritanian discretionary trust of £40,000 that was paid to Oscar in
2018/19. This has not been subject to Ruritanian tax.
During 2020/21, Oscar transferred £12,000 from Account C to Account D.
At 6 April 2020, Account D had a balance of £90,000.
This was made up of:
1) Ruritanian dividend income which had arisen in 2014. The gross amount was £36,000 and
Ruritanian tax of £6,000 had been deducted from it.
2) A gift from Oscar’s father of £60,000 made in 2016.
There have been no other transactions in Accounts C or D since 6 April 2020.
Oscar is considering remitting £30,000 to the UK from one of his Ruritanian accounts.
Requirement:
