THE CHARTERED INSTITUTE OF TAXATION
APPLICATION AND PROFESSIONAL SKILLS
Taxation of Larger Companies and Groups
November 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 the Tax Director of the in-house tax department at Dubfast & Glasburgh Group plc, the parent
company of a group of wholly owned UK tax resident subsidiaries.
The Board recently commissioned a report from external consultants, Berdad Partners, on how to develop
the group’s business. Berdad Partners recommended the disposal of the group’s property portfolio and
moving the business into online retailing.
The Board has accepted the suggestions of Berdad Partners and has identified four ways in which a
disposal of the property portfolio might be undertaken:
1) selling the properties directly;
2) selling DG Propco Ltd;
3) transferring the properties to a new subsidiary company, Newco, and then selling Newco; or
4) transferring the properties to a new subsidiary company, Newco, and then inviting a share
subscription to Newco from external investors.
The Board has also written an investment plan for the development of an online retail business.
George Remworth, Chief Financial Officer at Dubfast & Glasburgh Group plc, has asked you to write a
report to the Board, based on currently available information, recommending which of the four identified
disposal methods will maximise the post-tax sale proceeds and will best meet the Board’s commercial
objectives.
The following exhibits are provided to assist you:
EXHIBIT A: Extracts from the report by Berdad Partners
EXHIBIT B: Information on DG Propco Ltd
EXHIBIT C: Extracts from the investment plan for the proposed online business
EXHIBIT D: Pre-seen information
Requirement:
Write a report to the Board of Dubfast & Glasburgh Group plc recommending the disposal method
that will maximise the post-tax sale proceeds and best meet the commercial objectives.
Continued
Page 2 of 8 APS TOLC
,Continuation
EXHIBIT A
Extracts from the report by Berdad Partners
Overview
It is anticipated that within a period of 10 years, retailing will evolve so that selling in stores (whether “high
street” or on retail parks and similar) will decline substantially and online selling will increase to become
the dominant retail method.
In consequence of these changes, we expect that the demand for retail premises will decline and rents
will fall. Accordingly, the value of retail properties will also decline over this period.
We believe that the long-term future of successful retail is in online selling. The Group should adopt a
strategy of moving from high street/retail park selling to online retailing, over a 10-year timeframe.
Online retail involves holding stock in warehouses and delivering that stock directly to customers from
those warehouses.
Recommendations
As the capital value of the retail properties will decline, we recommend that all properties are sold as soon
as possible. At the same time, you should enter into short leases (of not more than 10 years duration)
with the new owners so that you can continue to trade from the properties for up to 10 years.
You should consider selling the properties as a single portfolio because individual sales would take longer,
thus reducing sales proceeds and delaying receipts needed for reinvestment. There is likely to be demand
from specialist property companies and external investors.
Proceeds from the sale of retail properties should be reinvested in a network of warehouses, and a
bespoke IT system, to move towards full online retailing.
Berdad Partners
15 October 2021
Continued
Page 3 of 8 APS TOLC
, Continuation
EXHIBIT B
Information on DG Propco Ltd
Background
DG Propco Ltd was a trading company until 1975, when it was renamed and became a property holding
company. All group properties are currently owned by DG Propco Ltd, and all secured borrowings are
held by DG Propco Ltd.
The shares of DG Propco Ltd are owned by Dubfast & Glasburgh Group plc. They have a capital gains
base cost at 31 March 1982 of £60 million.
DG Propco Ltd’s Statement of Financial Position as at 31 December
2020 2019
£ million £ million
Fixed assets:
Land and buildings 1,700 1,900
Long term debt (600) (650)
Net assets 1,100 1,250
Equity:
Share capital 200 200
Revaluation reserve 850 1,050
Reserves 50 0
Total equity 1,100 1,250
Properties
Category Current total Current borrowings
market value secured against
Total cost (Note 3) properties
£ million £ million £ million
Category A: 23 retail properties acquired 50 750 250
before 31 March 1982 (Note 1)
Category B: 37 retail properties acquired 300 980 350
between 1 April 1982 and 31 December
2019 (Note 2)
Notes
1) The total market value of Category A properties is estimated to have been £200 million at 31 March
1982.
2) The Category B properties were purchased at regular intervals; approximately one every year.
3) All properties have increased in value by more than the retail price index.
Capital Allowances
No expenditure qualifies for Structures & Buildings Allowance.
DG Propco Ltd’s plant & machinery capital allowances pool is all in respect of building fixtures with an
original cost of £30 million.
Continued
Page 4 of 8 APS TOLC
APPLICATION AND PROFESSIONAL SKILLS
Taxation of Larger Companies and Groups
November 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 the Tax Director of the in-house tax department at Dubfast & Glasburgh Group plc, the parent
company of a group of wholly owned UK tax resident subsidiaries.
The Board recently commissioned a report from external consultants, Berdad Partners, on how to develop
the group’s business. Berdad Partners recommended the disposal of the group’s property portfolio and
moving the business into online retailing.
The Board has accepted the suggestions of Berdad Partners and has identified four ways in which a
disposal of the property portfolio might be undertaken:
1) selling the properties directly;
2) selling DG Propco Ltd;
3) transferring the properties to a new subsidiary company, Newco, and then selling Newco; or
4) transferring the properties to a new subsidiary company, Newco, and then inviting a share
subscription to Newco from external investors.
The Board has also written an investment plan for the development of an online retail business.
George Remworth, Chief Financial Officer at Dubfast & Glasburgh Group plc, has asked you to write a
report to the Board, based on currently available information, recommending which of the four identified
disposal methods will maximise the post-tax sale proceeds and will best meet the Board’s commercial
objectives.
The following exhibits are provided to assist you:
EXHIBIT A: Extracts from the report by Berdad Partners
EXHIBIT B: Information on DG Propco Ltd
EXHIBIT C: Extracts from the investment plan for the proposed online business
EXHIBIT D: Pre-seen information
Requirement:
Write a report to the Board of Dubfast & Glasburgh Group plc recommending the disposal method
that will maximise the post-tax sale proceeds and best meet the commercial objectives.
Continued
Page 2 of 8 APS TOLC
,Continuation
EXHIBIT A
Extracts from the report by Berdad Partners
Overview
It is anticipated that within a period of 10 years, retailing will evolve so that selling in stores (whether “high
street” or on retail parks and similar) will decline substantially and online selling will increase to become
the dominant retail method.
In consequence of these changes, we expect that the demand for retail premises will decline and rents
will fall. Accordingly, the value of retail properties will also decline over this period.
We believe that the long-term future of successful retail is in online selling. The Group should adopt a
strategy of moving from high street/retail park selling to online retailing, over a 10-year timeframe.
Online retail involves holding stock in warehouses and delivering that stock directly to customers from
those warehouses.
Recommendations
As the capital value of the retail properties will decline, we recommend that all properties are sold as soon
as possible. At the same time, you should enter into short leases (of not more than 10 years duration)
with the new owners so that you can continue to trade from the properties for up to 10 years.
You should consider selling the properties as a single portfolio because individual sales would take longer,
thus reducing sales proceeds and delaying receipts needed for reinvestment. There is likely to be demand
from specialist property companies and external investors.
Proceeds from the sale of retail properties should be reinvested in a network of warehouses, and a
bespoke IT system, to move towards full online retailing.
Berdad Partners
15 October 2021
Continued
Page 3 of 8 APS TOLC
, Continuation
EXHIBIT B
Information on DG Propco Ltd
Background
DG Propco Ltd was a trading company until 1975, when it was renamed and became a property holding
company. All group properties are currently owned by DG Propco Ltd, and all secured borrowings are
held by DG Propco Ltd.
The shares of DG Propco Ltd are owned by Dubfast & Glasburgh Group plc. They have a capital gains
base cost at 31 March 1982 of £60 million.
DG Propco Ltd’s Statement of Financial Position as at 31 December
2020 2019
£ million £ million
Fixed assets:
Land and buildings 1,700 1,900
Long term debt (600) (650)
Net assets 1,100 1,250
Equity:
Share capital 200 200
Revaluation reserve 850 1,050
Reserves 50 0
Total equity 1,100 1,250
Properties
Category Current total Current borrowings
market value secured against
Total cost (Note 3) properties
£ million £ million £ million
Category A: 23 retail properties acquired 50 750 250
before 31 March 1982 (Note 1)
Category B: 37 retail properties acquired 300 980 350
between 1 April 1982 and 31 December
2019 (Note 2)
Notes
1) The total market value of Category A properties is estimated to have been £200 million at 31 March
1982.
2) The Category B properties were purchased at regular intervals; approximately one every year.
3) All properties have increased in value by more than the retail price index.
Capital Allowances
No expenditure qualifies for Structures & Buildings Allowance.
DG Propco Ltd’s plant & machinery capital allowances pool is all in respect of building fixtures with an
original cost of £30 million.
Continued
Page 4 of 8 APS TOLC
