THE CHARTERED INSTITUTE OF TAXATION
APPLICATION AND PROFESSIONAL SKILLS
VAT and Other Indirect Taxes
May 2021
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.
• 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.
,You are Jo Gupta, a tax manager at Sawyers LLP, a firm of Chartered Tax Advisers. You have
received a letter from Pete Ording (EXHIBIT A), Managing Director of Sandsails Ltd. Your firm
acts for both the company and Pete and his family. Sandsails Ltd carries on a sand sailing
business at a site on the exclusive Chington Peninsular. Part of its business involves the
operation of a sand sailing club called “Chington Zephyrs”.
An opportunity has arisen to purchase two properties also situated on the Peninsular. One
property comprises land and buildings currently used by Chington Links Golf Club Ltd and in
addition to this Pete is considering acquiring the undertaking of Chington Links Golf Club Ltd
as part of Sandsails Ltd’s business. The other property is a nearby country house called “The
Larches”, which he is also interested in acquiring as his family home.
A valuation of the two properties has been obtained by Pete and before making an offer, he
would like your advice on how best to structure the proposed acquisitions having regard to any
tax implications.
The following exhibits are provided to assist you:
EXHIBIT A: Letter from Pete Ording of Sandsails Ltd
EXHIBIT B: Valuation Report by Terraspec LLP
EXHIBIT C: Letter from Colonel Penfold to Pete Ording
EXHIBIT D: Memorandum of Association of Chington Links Golf Club Ltd
EXHIBIT E: Pre-seen information
Requirement:
Write a letter to Pete recommending how best to structure the proposed acquisitions.
Continued
Page 2 of 13 APS VAT
,Continuation
EXHIBIT A
Letter from Pete Ording of Sandsails Ltd
Jo Gupta Sandsails Ltd
Sawyers LLP 110 Beach Road
99 The Esplanade Chington
Wilminster Winshire
Winshire WM8 1SW
WM1 2PL
3 May 2021
Dear Jo
Business opportunity
As you know, Sandsails Ltd has had an excellent year. Our purchase of those new Class 3
yachts is certainly paying off! The company has also benefitted from the popularity of Chington
Zephyrs, with membership up to 120. We have recently improved benefits for Club members
by introducing a discount card for use in local shops - and all for £600 a year!
An exciting business opportunity has now arisen and I would welcome your advice.
You will know of Max Slazenger, the famous golfer, who retired to Chington some years ago.
Max lives at “The Larches”, the big house on the east coast of the Peninsular. He also owns
the adjacent land (known locally as Chington Links) which he made into a golf course. Having
recently lost his wife, Max is selling up and moving to The Bahamas. I have had some initial
discussions, but nothing is agreed as yet. I got Terraspec LLP to provide a valuation and
enclose their report which gives details of the two properties.
As you will be aware, Sandsails Ltd has long-term plans for development of the Chington
Peninsular as an exclusive leisure resort. It would therefore be very attractive to us to acquire
the golf course and integrate the golf club undertaking into Chington Zephyrs, so members
could enjoy both types of sporting activities. We believe this could greatly increase membership
numbers. Sandsails Ltd has surplus cash and this would seem a good investment. If we can
acquire more land in the future, we plan to add tennis, squash, croquet and bowls, too!
The golf course is currently used by Chington Links Golf Club Ltd, of which Max was one of the
Founders. I believe some influential local people are also members, including a number of
councillors and the Chairman of the Planning Committee! Arrangements there, I have to say,
seem rather informal. I managed to get hold of the Memorandum of Association and some
financials from Colonel Penfold, the Club Treasurer. I enclose his letter dated 18 April 2021. I
am still waiting for a Balance Sheet! Subsequently, in a phone conversation, he let slip that the
Club regards itself as a private concern and has never registered for VAT or filed any form of
tax return. Max told me he has great affection for the Club. He hopes any purchaser would keep
it going, so he can return and play a round occasionally with his friends.
My current thinking is for Sandsails Ltd to buy the golf course property. In the short term we will
probably seek to retain existing staff, including Tom, the Groundsman, who lives on site. If
possible, we want to merge the club undertaking with Chington Zephyrs and integrate the two
sporting activities. I am looking to you for suggestions how this might be done.
One point occurred to me: we charge VAT on Chington Zephyrs’ subscriptions, but I read
somewhere that sports clubs are VAT-exempt, so I’m wondering if we’ve been paying too much
VAT all these years? Are we due a refund?
Continued
Page 3 of 13 APS VAT
, Continuation
“The Larches” is very spacious. As our bungalow is now too small, I plan to sell it and purchase
“The Larches” to use as our family home. As an alternative to my buying it, I thought that it
could make sense for Sandsails Ltd to buy “The Larches” and lease it to me on favourable
terms, rather than me buying the house in my own name. In either case, borrowing of around
£250,000 would be needed, but Sandsails Ltd may be able to get a better interest rate from a
lender.
I guess the various options will give rise to all kinds of tax issues. Before agreeing a price with
Max, I need your advice on these proposals and your recommendations on the best way
forward.
I look forward to hearing from you.
Yours sincerely
Pete
Pete Ording
Managing Director
EXHIBIT B
Valuation Report by Terraspec LLP
Report on proposed purchase of Chington Links and “The Larches”, Chington, prepared for
Sandsails Ltd
Further to your verbal instructions and our recent site visits, our estimated valuation, which is
solely for the purposes of purchase negotiations, is as follows.
Chington Links Golf Course (Land Registry Title No. WIN21543)
This property, the freehold of which Mr Slazenger purchased in 2017, extends to around 29.2
hectares. Originally comprising grazing and heathland, the property includes a clubhouse,
known as The Hideaway (see below) and Gorse Cottage (see below). In 2017, Mr Slazenger
obtained planning permission to lay-out a 9-hole golf course for private use by himself and his
friends. The works involved landscaping, construction of drainage culverts and footbridges, and
laying a new road to Gorse Cottage. We are informed these works were completed in July 2018
at a total cost to Mr Slazenger of £190,400.
In October 2018, Mr Slazenger also constructed, at a cost of £66,500, a timber clubhouse (The
Hideaway) at the north-west corner of the property. Subsequently, Chington Links Golf Club (of
which he was one of the Founders) was formed, which now uses the Golf Course property. The
Hideaway is of very basic design comprising kitchen, bar, locker room and small shop (which
is also used by Mr Len Hickory, the Club’s Professional). There is no formal tenancy between
Mr Slazenger and the Club. We understand he has been content to receive a nominal rental of
£500 per month (payable from 30 April 2019) until such time as the Club shows a healthy
surplus.
Gorse Cottage is a former shepherd’s cottage, situated on the south-east corner of the property.
Currently, it is let rent-free to the golf club groundsman, Mr Tom Greensward. However, we
understand vacant possession can be obtained on completion. Gorse Cottage forms part of the
property but, if sold separately, we estimate the current value at no more than £120,000 as it is
in need of renovation.
The Valuation Officer recently agreed a rateable value of £17,500 for the Golf Course. Gorse
Cottage is separately assessed for Council Tax within Band A and has an annual value of £180.
Continued
Page 4 of 13 APS VAT
APPLICATION AND PROFESSIONAL SKILLS
VAT and Other Indirect Taxes
May 2021
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.
• 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.
,You are Jo Gupta, a tax manager at Sawyers LLP, a firm of Chartered Tax Advisers. You have
received a letter from Pete Ording (EXHIBIT A), Managing Director of Sandsails Ltd. Your firm
acts for both the company and Pete and his family. Sandsails Ltd carries on a sand sailing
business at a site on the exclusive Chington Peninsular. Part of its business involves the
operation of a sand sailing club called “Chington Zephyrs”.
An opportunity has arisen to purchase two properties also situated on the Peninsular. One
property comprises land and buildings currently used by Chington Links Golf Club Ltd and in
addition to this Pete is considering acquiring the undertaking of Chington Links Golf Club Ltd
as part of Sandsails Ltd’s business. The other property is a nearby country house called “The
Larches”, which he is also interested in acquiring as his family home.
A valuation of the two properties has been obtained by Pete and before making an offer, he
would like your advice on how best to structure the proposed acquisitions having regard to any
tax implications.
The following exhibits are provided to assist you:
EXHIBIT A: Letter from Pete Ording of Sandsails Ltd
EXHIBIT B: Valuation Report by Terraspec LLP
EXHIBIT C: Letter from Colonel Penfold to Pete Ording
EXHIBIT D: Memorandum of Association of Chington Links Golf Club Ltd
EXHIBIT E: Pre-seen information
Requirement:
Write a letter to Pete recommending how best to structure the proposed acquisitions.
Continued
Page 2 of 13 APS VAT
,Continuation
EXHIBIT A
Letter from Pete Ording of Sandsails Ltd
Jo Gupta Sandsails Ltd
Sawyers LLP 110 Beach Road
99 The Esplanade Chington
Wilminster Winshire
Winshire WM8 1SW
WM1 2PL
3 May 2021
Dear Jo
Business opportunity
As you know, Sandsails Ltd has had an excellent year. Our purchase of those new Class 3
yachts is certainly paying off! The company has also benefitted from the popularity of Chington
Zephyrs, with membership up to 120. We have recently improved benefits for Club members
by introducing a discount card for use in local shops - and all for £600 a year!
An exciting business opportunity has now arisen and I would welcome your advice.
You will know of Max Slazenger, the famous golfer, who retired to Chington some years ago.
Max lives at “The Larches”, the big house on the east coast of the Peninsular. He also owns
the adjacent land (known locally as Chington Links) which he made into a golf course. Having
recently lost his wife, Max is selling up and moving to The Bahamas. I have had some initial
discussions, but nothing is agreed as yet. I got Terraspec LLP to provide a valuation and
enclose their report which gives details of the two properties.
As you will be aware, Sandsails Ltd has long-term plans for development of the Chington
Peninsular as an exclusive leisure resort. It would therefore be very attractive to us to acquire
the golf course and integrate the golf club undertaking into Chington Zephyrs, so members
could enjoy both types of sporting activities. We believe this could greatly increase membership
numbers. Sandsails Ltd has surplus cash and this would seem a good investment. If we can
acquire more land in the future, we plan to add tennis, squash, croquet and bowls, too!
The golf course is currently used by Chington Links Golf Club Ltd, of which Max was one of the
Founders. I believe some influential local people are also members, including a number of
councillors and the Chairman of the Planning Committee! Arrangements there, I have to say,
seem rather informal. I managed to get hold of the Memorandum of Association and some
financials from Colonel Penfold, the Club Treasurer. I enclose his letter dated 18 April 2021. I
am still waiting for a Balance Sheet! Subsequently, in a phone conversation, he let slip that the
Club regards itself as a private concern and has never registered for VAT or filed any form of
tax return. Max told me he has great affection for the Club. He hopes any purchaser would keep
it going, so he can return and play a round occasionally with his friends.
My current thinking is for Sandsails Ltd to buy the golf course property. In the short term we will
probably seek to retain existing staff, including Tom, the Groundsman, who lives on site. If
possible, we want to merge the club undertaking with Chington Zephyrs and integrate the two
sporting activities. I am looking to you for suggestions how this might be done.
One point occurred to me: we charge VAT on Chington Zephyrs’ subscriptions, but I read
somewhere that sports clubs are VAT-exempt, so I’m wondering if we’ve been paying too much
VAT all these years? Are we due a refund?
Continued
Page 3 of 13 APS VAT
, Continuation
“The Larches” is very spacious. As our bungalow is now too small, I plan to sell it and purchase
“The Larches” to use as our family home. As an alternative to my buying it, I thought that it
could make sense for Sandsails Ltd to buy “The Larches” and lease it to me on favourable
terms, rather than me buying the house in my own name. In either case, borrowing of around
£250,000 would be needed, but Sandsails Ltd may be able to get a better interest rate from a
lender.
I guess the various options will give rise to all kinds of tax issues. Before agreeing a price with
Max, I need your advice on these proposals and your recommendations on the best way
forward.
I look forward to hearing from you.
Yours sincerely
Pete
Pete Ording
Managing Director
EXHIBIT B
Valuation Report by Terraspec LLP
Report on proposed purchase of Chington Links and “The Larches”, Chington, prepared for
Sandsails Ltd
Further to your verbal instructions and our recent site visits, our estimated valuation, which is
solely for the purposes of purchase negotiations, is as follows.
Chington Links Golf Course (Land Registry Title No. WIN21543)
This property, the freehold of which Mr Slazenger purchased in 2017, extends to around 29.2
hectares. Originally comprising grazing and heathland, the property includes a clubhouse,
known as The Hideaway (see below) and Gorse Cottage (see below). In 2017, Mr Slazenger
obtained planning permission to lay-out a 9-hole golf course for private use by himself and his
friends. The works involved landscaping, construction of drainage culverts and footbridges, and
laying a new road to Gorse Cottage. We are informed these works were completed in July 2018
at a total cost to Mr Slazenger of £190,400.
In October 2018, Mr Slazenger also constructed, at a cost of £66,500, a timber clubhouse (The
Hideaway) at the north-west corner of the property. Subsequently, Chington Links Golf Club (of
which he was one of the Founders) was formed, which now uses the Golf Course property. The
Hideaway is of very basic design comprising kitchen, bar, locker room and small shop (which
is also used by Mr Len Hickory, the Club’s Professional). There is no formal tenancy between
Mr Slazenger and the Club. We understand he has been content to receive a nominal rental of
£500 per month (payable from 30 April 2019) until such time as the Club shows a healthy
surplus.
Gorse Cottage is a former shepherd’s cottage, situated on the south-east corner of the property.
Currently, it is let rent-free to the golf club groundsman, Mr Tom Greensward. However, we
understand vacant possession can be obtained on completion. Gorse Cottage forms part of the
property but, if sold separately, we estimate the current value at no more than £120,000 as it is
in need of renovation.
The Valuation Officer recently agreed a rateable value of £17,500 for the Golf Course. Gorse
Cottage is separately assessed for Council Tax within Band A and has an annual value of £180.
Continued
Page 4 of 13 APS VAT
