THE CHARTERED INSTITUTE OF TAXATION
ADVANCED TECHNICAL
Taxation of Individuals
May 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. Jason Smith has always been UK domiciled and resident.
He has accepted a six-year contract to work full-time at a hospital in Australia starting on
6 April 2022. During the contract, he plans to visit the UK for around four weeks each tax
year and intends to return to the UK permanently once his contract ends.
Since 6 April 2021 Jason has spent three weeks out of the UK, when he travelled to
Australia to meet his new employers and look for accommodation.
His employers have asked him if he could start his new job in December 2021 rather
than waiting until April 2022.
Jason owns two residential properties in the UK, 29 and 31 Brooke Street, which he
purchased in July 2016. 29 Brooke Street is his home and will remain available for him
to use when he visits the UK. 31 Brooke Street has always been let out. Jason plans to
continue to let 31 Brooke Street for the next two or three years and will then try to sell
the property.
Requirement:
Explain how the change in start date will affect Jason’s UK residence position for
2021/22 and explain the implications of renting and selling 31 Brooke Street whilst
he is out of the UK.
You are NOT required to explain the detailed requirements of the third automatic
overseas test. (15)
2. Polly Johnson has worked for Oldcorne Ltd since 6 April 2007 and has always been a
member of the company’s final salary pension scheme. The accrual rate for the scheme
is 1/60th, with a maximum of 40 years qualifying service. The following is relevant to the
2020/21 tax year:
1) Her annual salary (payable on the last day of the month) was £195,000 and this
increased to £205,000 on 1 October 2020. Her P60 shows pay of £200,000 and
tax deducted of £78,000.
2) Her 2020/21 tax code shows a tax underpayment from an earlier year of £1,000.
3) Oldcorne Ltd made pension contributions of £50,000 and Polly made no
contributions. She had unused annual allowance brought forward at 6 April 2020
of £2,000.
4) Polly received UK bank interest of £14,000 and gross foreign dividends from
Farland of £2,000 from which tax of £400 was deducted at source. The Double
Tax Treaty between the UK and Farland provides for tax to be deducted at 15% in
Farland.
5) Polly made net charitable donations under gift aid of £3,000.
6) Polly is married to Ben. His daughter from a previous marriage lives with them
and Ben received £1,095 in child benefit during the year. Ben’s taxable income
was £65,000 in 2020/21.
Requirement:
Calculate the Income Tax payable by Polly for 2020/21.
(20)
Page 2 of 5 AT IND
,3. Panos Freeman is a non UK domiciled individual. Panos works full-time for Cool Albania
Ltd, an Albanian trading company.
Panos is coming to the UK, during 2021/22, for two years on a secondment to work for
the UK branch of Cool Albania Ltd. During the secondment, Panos will return to Albania
to work for one week each month and will continue to be employed by Cool Albania Ltd
under his existing Albanian contract. Cool Albania Ltd will be required to withhold tax in
Albania on his earnings in relation to the period he works there.
Prior to starting his secondment, Panos will purchase a flat in the UK to live in whist he
is here. To fund the purchase, he will use cash from his Albanian bank accounts and a
loan from an Albanian bank, which will be secured on his property in Albania. When he
returns to Albania following the secondment, he will keep the UK property for use as a
family holiday home.
Under the statutory residence test, Panos will not be UK resident for the 2021/22 tax year
and will become UK resident on 6 April 2022. Panos was also resident in the UK in
2016/17 and 2017/18 when he was previously seconded to the UK. Albania is outside
the EEA and does not have a reciprocal social security agreement with the UK.
Requirement:
Explain Panos’s UK Income Tax and NIC obligations for 2021/22 and 2022/23. You
are NOT required to explain his residency position. (15)
4. Suzie Garcia is a Spanish domiciled individual who has been UK resident since 6 April
2019 and she has claimed the remittance basis of taxation for the 2019/20 tax year and
will do so for the 2020/21 tax year. She is an additional rate taxpayer.
In May 2019, Suzie acquired shares in Pine Ltd, a non-UK company, for £70,000. In
March 2020, she sold her shares in Pine Ltd for £90,000 and paid the proceeds into her
Spanish bank account.
In May 2020, Suzie used £10,000 of the proceeds from the sale of Pine Ltd to buy
jewellery whilst on holiday in Dubai which she brought into the UK for her personal use.
In March 2021, Suzie gifted this jewellery to her daughter, Danielle, for her 21st birthday.
Danielle lives in the UK and the jewellery was worth £10,000 at the time of the gift.
On 6 April 2020 Suzie set up a non-UK resident trust using offshore monies. She cannot
benefit from the trust nor can her spouse and minor children.
The trust used monies to subscribe for all of the shares in Oak Ltd, a non-UK resident
company in which Suzie is a director.
Oak Ltd used the subscription monies to acquire a UK investment portfolio which is
currently worth £1 million and which generated UK dividend income of £100,000 in the
2020/21 tax year. Portfolio management expenses of £10,000 were incurred in the
2020/21 tax year.
Requirement:
1) Explain the Capital Gains Tax consequences of the purchase and gift of the
jewellery. (8)
2) Discuss whether the transfer of assets abroad legislation can apply to the
income of Oak Ltd. (12)
Total (20)
You are not required to calculate any tax liabilities.
Page 3 of 5 AT IND
, 5. Steve Casey is UK resident and domiciled.
During the year ended 5 April 2021 Steve received a salary of £42,000 and paid net
personal pension contributions of £1,200. He also disposed of the following assets:
Shares in Daffodil Ltd
In June 2020 Steve sold his 100 shares in Daffodil Ltd, an unquoted company which
operates a successful electrical engineering business and also receives a small amount
of rental income from a commercial unit.
He subscribed for these shares, for cash, on incorporation in January 2000 for £1 per
share. Steve has been the sole director and shareholder since incorporation.
Under the terms of the share sale agreement, Steve received cash proceeds of
£1,500,000 in June 2020. In December 2021 he will receive further cash proceeds equal
to 15% of Daffodil Ltd’s profits for the year ended 30 September 2021, which are forecast
to be £3,575,000.
Shares in Poppy Ltd
In August 2020 Steve sold his 100 shares in Poppy Ltd, an unquoted company which
operates a care home, for £1,782 per share. He subscribed for these shares, for cash,
in June 2016 at £550 per share. The 100 shares represented 1.2% of Poppy Ltd’s issued
share capital. The rest of the shares are owned by the directors of the company and 10
unrelated individuals. Steve has never been a director or employee of this company.
Ivy Cottage
In September 2020 Steve sold Ivy Cottage, which he had always used as a family holiday
home. No Principal Private Residence election had been made on this property. The sale
proceeds were £135,000 and he incurred fees of £2,700. Steve inherited Ivy Cottage in
July 2007 at a probate value of £98,000.
In August 2015 Steve paid £325 to demolish a derelict outbuilding at the property and
£6,500 to build a new one, which he used for storage. This outbuilding was sold along
with the cottage.
Steve has never made a claim for Business Asset Disposal Relief.
Requirement:
Explain the Capital Gains Tax consequences of the three transactions and
calculate Steve’s Capital Gains Tax liability for 2020/21. (15)
Page 4 of 5 AT IND
ADVANCED TECHNICAL
Taxation of Individuals
May 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. Jason Smith has always been UK domiciled and resident.
He has accepted a six-year contract to work full-time at a hospital in Australia starting on
6 April 2022. During the contract, he plans to visit the UK for around four weeks each tax
year and intends to return to the UK permanently once his contract ends.
Since 6 April 2021 Jason has spent three weeks out of the UK, when he travelled to
Australia to meet his new employers and look for accommodation.
His employers have asked him if he could start his new job in December 2021 rather
than waiting until April 2022.
Jason owns two residential properties in the UK, 29 and 31 Brooke Street, which he
purchased in July 2016. 29 Brooke Street is his home and will remain available for him
to use when he visits the UK. 31 Brooke Street has always been let out. Jason plans to
continue to let 31 Brooke Street for the next two or three years and will then try to sell
the property.
Requirement:
Explain how the change in start date will affect Jason’s UK residence position for
2021/22 and explain the implications of renting and selling 31 Brooke Street whilst
he is out of the UK.
You are NOT required to explain the detailed requirements of the third automatic
overseas test. (15)
2. Polly Johnson has worked for Oldcorne Ltd since 6 April 2007 and has always been a
member of the company’s final salary pension scheme. The accrual rate for the scheme
is 1/60th, with a maximum of 40 years qualifying service. The following is relevant to the
2020/21 tax year:
1) Her annual salary (payable on the last day of the month) was £195,000 and this
increased to £205,000 on 1 October 2020. Her P60 shows pay of £200,000 and
tax deducted of £78,000.
2) Her 2020/21 tax code shows a tax underpayment from an earlier year of £1,000.
3) Oldcorne Ltd made pension contributions of £50,000 and Polly made no
contributions. She had unused annual allowance brought forward at 6 April 2020
of £2,000.
4) Polly received UK bank interest of £14,000 and gross foreign dividends from
Farland of £2,000 from which tax of £400 was deducted at source. The Double
Tax Treaty between the UK and Farland provides for tax to be deducted at 15% in
Farland.
5) Polly made net charitable donations under gift aid of £3,000.
6) Polly is married to Ben. His daughter from a previous marriage lives with them
and Ben received £1,095 in child benefit during the year. Ben’s taxable income
was £65,000 in 2020/21.
Requirement:
Calculate the Income Tax payable by Polly for 2020/21.
(20)
Page 2 of 5 AT IND
,3. Panos Freeman is a non UK domiciled individual. Panos works full-time for Cool Albania
Ltd, an Albanian trading company.
Panos is coming to the UK, during 2021/22, for two years on a secondment to work for
the UK branch of Cool Albania Ltd. During the secondment, Panos will return to Albania
to work for one week each month and will continue to be employed by Cool Albania Ltd
under his existing Albanian contract. Cool Albania Ltd will be required to withhold tax in
Albania on his earnings in relation to the period he works there.
Prior to starting his secondment, Panos will purchase a flat in the UK to live in whist he
is here. To fund the purchase, he will use cash from his Albanian bank accounts and a
loan from an Albanian bank, which will be secured on his property in Albania. When he
returns to Albania following the secondment, he will keep the UK property for use as a
family holiday home.
Under the statutory residence test, Panos will not be UK resident for the 2021/22 tax year
and will become UK resident on 6 April 2022. Panos was also resident in the UK in
2016/17 and 2017/18 when he was previously seconded to the UK. Albania is outside
the EEA and does not have a reciprocal social security agreement with the UK.
Requirement:
Explain Panos’s UK Income Tax and NIC obligations for 2021/22 and 2022/23. You
are NOT required to explain his residency position. (15)
4. Suzie Garcia is a Spanish domiciled individual who has been UK resident since 6 April
2019 and she has claimed the remittance basis of taxation for the 2019/20 tax year and
will do so for the 2020/21 tax year. She is an additional rate taxpayer.
In May 2019, Suzie acquired shares in Pine Ltd, a non-UK company, for £70,000. In
March 2020, she sold her shares in Pine Ltd for £90,000 and paid the proceeds into her
Spanish bank account.
In May 2020, Suzie used £10,000 of the proceeds from the sale of Pine Ltd to buy
jewellery whilst on holiday in Dubai which she brought into the UK for her personal use.
In March 2021, Suzie gifted this jewellery to her daughter, Danielle, for her 21st birthday.
Danielle lives in the UK and the jewellery was worth £10,000 at the time of the gift.
On 6 April 2020 Suzie set up a non-UK resident trust using offshore monies. She cannot
benefit from the trust nor can her spouse and minor children.
The trust used monies to subscribe for all of the shares in Oak Ltd, a non-UK resident
company in which Suzie is a director.
Oak Ltd used the subscription monies to acquire a UK investment portfolio which is
currently worth £1 million and which generated UK dividend income of £100,000 in the
2020/21 tax year. Portfolio management expenses of £10,000 were incurred in the
2020/21 tax year.
Requirement:
1) Explain the Capital Gains Tax consequences of the purchase and gift of the
jewellery. (8)
2) Discuss whether the transfer of assets abroad legislation can apply to the
income of Oak Ltd. (12)
Total (20)
You are not required to calculate any tax liabilities.
Page 3 of 5 AT IND
, 5. Steve Casey is UK resident and domiciled.
During the year ended 5 April 2021 Steve received a salary of £42,000 and paid net
personal pension contributions of £1,200. He also disposed of the following assets:
Shares in Daffodil Ltd
In June 2020 Steve sold his 100 shares in Daffodil Ltd, an unquoted company which
operates a successful electrical engineering business and also receives a small amount
of rental income from a commercial unit.
He subscribed for these shares, for cash, on incorporation in January 2000 for £1 per
share. Steve has been the sole director and shareholder since incorporation.
Under the terms of the share sale agreement, Steve received cash proceeds of
£1,500,000 in June 2020. In December 2021 he will receive further cash proceeds equal
to 15% of Daffodil Ltd’s profits for the year ended 30 September 2021, which are forecast
to be £3,575,000.
Shares in Poppy Ltd
In August 2020 Steve sold his 100 shares in Poppy Ltd, an unquoted company which
operates a care home, for £1,782 per share. He subscribed for these shares, for cash,
in June 2016 at £550 per share. The 100 shares represented 1.2% of Poppy Ltd’s issued
share capital. The rest of the shares are owned by the directors of the company and 10
unrelated individuals. Steve has never been a director or employee of this company.
Ivy Cottage
In September 2020 Steve sold Ivy Cottage, which he had always used as a family holiday
home. No Principal Private Residence election had been made on this property. The sale
proceeds were £135,000 and he incurred fees of £2,700. Steve inherited Ivy Cottage in
July 2007 at a probate value of £98,000.
In August 2015 Steve paid £325 to demolish a derelict outbuilding at the property and
£6,500 to build a new one, which he used for storage. This outbuilding was sold along
with the cottage.
Steve has never made a claim for Business Asset Disposal Relief.
Requirement:
Explain the Capital Gains Tax consequences of the three transactions and
calculate Steve’s Capital Gains Tax liability for 2020/21. (15)
Page 4 of 5 AT IND
