THE CHARTERED INSTITUTE OF TAXATION
ADVANCED TECHNICAL
Domestic Indirect Taxation
November 2022
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.
• 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.
• Additional marks may be awarded for presentation.
• You must type your answer in the space on the screen as indicated by the Exam4 guidance.
,1. Animal Valley Ltd is a not-for-profit company limited by guarantee, with some of its work funded by
grants and donations. It operates a sanctuary for small species including lemurs, otters, meerkats,
birds and wildcats, and is open daily for admission by the general public. Its constitution provides
that it will be non-profit making with any surpluses being re-invested into the activities. Management
is undertaken by a small board of volunteers who have no financial interest in the sanctuary.
A new experience being offered has proven to be very popular with visitors, involving close
interaction and feeding the meerkats and lemurs. The income from these experiences, along with
the admission income, helps towards funding the sanctuary’s growth.
A small part of the sanctuary housing five African wildcats is currently closed to visitors. The animals
were imported from Africa and are being quarantined whilst further research is undertaken on the
species, and their breeding habits. This work is being funded by a conservation grant. It is hoped
that the enclosure housing the African wildcats will be open to visitors in 2023 or 2024.
In order to develop the sanctuary’s site and ability to house more animals, it needs to increase its
revenue. To do so, it has obtained bank finance to:
1) Increase its car park from 25 to 60 spaces (£80,000),
2) Add a small café and gift shop and extend the existing toilet block, (£200,000), and
3) Improve the African wildcat enclosure, which is currently closed to the public (£50,000). This
area requires significant landscaping work but represents a small proportion (around 10%) of
the sanctuary’s total site.
All amounts are VAT exclusive. The works will start in January 2023 and will take approximately
two months to complete.
Income for the year ended 31 May 2022, and forecast income for the following two years is:
Income Stream 31 May 22 31 May 23 31 May 24
£ £ £
Donations 45,000 50,000 55,000
Entry Fees 225,000 300,000 560,000
Conservation Grant 0 100,000 0
Animal Experiences 40,000 60,000 85,000
Café & Gift Shop N/A 50,000 360,000
Car parking 18,700 29,500 46,750
Total £328,700 £992,500 £1,081,750
The sanctuary is not yet registered for VAT, but has been considering whether, in light of the above
plans, it should be. The sanctuary wants to understand what registering will mean for it on an
on-going basis, and the extent to which it might recover VAT on the building work and running
costs.
Requirement:
Discuss, with reference to relevant case law, the consequences of VAT registration for
Animal Valley Ltd and make appropriate recommendations to maximise the recovery of
input tax. (15)
Page 2 of 7 AT DIT
,2. Ffion is a qualified Physiotherapist. She is currently working for the NHS but wants to become self-
employed in February 2023 using some money she inherited on the death of her aunt.
Her intention is to provide ‘whole mind and body experience’ sessions, which would include
physiotherapy, nutritional advice and mindfulness. Initially she will provide these to private
individuals from her home. She will purchase a wooden cabin and pay for a firm to erect it at the
bottom of her garden. Where a client cannot travel to see Ffion, she will provide her service in a
client’s own home. She is looking at a combi-van vehicle which has rear seats that fold down so it
is large enough for her to fit her physio table in.
Ffion is unsure how to structure her pricing. She is thinking of charging a flat rate fee of £65 an
hour for her services, and any products that the clients wish to purchase would be invoiced
separately. The client would pay £50 for an introductory session, at which it would be decided what
they wanted out of each subsequent session, and how many sessions they would require.
A typical session is likely to include:
45 minutes of physiotherapy
10 minutes of relaxation techniques
5 minutes nutritional advice
Ffion will have a range of products to sell. Edible face creams are currently a trend with celebrities.
They are predominantly made from a flavoured natural set yogurt, with real fruit pieces in them.
They retail at £20 a tub. Ffion is thinking of some introductory offers for her products. She can sell
a case of 50 lavender spray mists for £300 (£6 each), instead of individually for £8 each. She will
also do a ‘£30 deal’ whereby a client can purchase a face cream, a mindfulness CD (sold
individually for £10), and a spray mist will be included “for free”.
Ffion’s friend Elsa is the CEO of a large finance company, F12X Ltd, and is interested in paying
her to lead well-being sessions for its staff. F12X Ltd has offices in 16 UK cities and Ffion would be
paid £2,000 a day to provide advice on how a person can look after their own physical and
emotional well-being. Ffion would look at marketing this service to other companies.
Ffion has written a business plan and estimates that her income from private individuals could be
£60,000 a year for services and £10,000 for products sold with a further £58,000 from the corporate
work. Ffion does not want to register for VAT as she wants to remain as competitive as possible
with the supplies to private individuals. She wishes to ascertain whether she can structure her
business in such a way that she will not be required to register.
Requirement:
Discuss the VAT implications of Ffion’s proposed business venture. (20)
Page 3 of 7 AT DIT
, 3. Albert and Josef are brothers and each own 50% of Propz Ltd. Propz Ltd owns a portfolio of
residential and commercial properties that are rented out to individuals and businesses. It has 20
staff. Both brothers and the company are UK resident.
Albert and Josef want to expand Propz Ltd’s portfolio and have identified a property, Leewood
House, to buy at a cost of £510,000. Alternatively, Albert is looking for a new home and this property
may potentially be suitable for him. It is a four bedroomed dwelling, fully furnished with carpets,
curtains and other free-standing furniture. The market value of the carpets, curtains and free-
standing furniture included with the house is £20,000.
The house contains a “granny annexe”, has a 1,500 square feet barn in the grounds (part of which
has been converted into an office) and is surrounded by two acres of land. Leewood House has
been marketed by the estate agents as ‘a fantastic home with a business opportunity for the right
buyer!’
The land is currently let to a local farmer to graze his sheep. The farmer pays rent of £2 a week per
sheep and there are around 15 sheep grazing most of the year. The income is used to cover the
cost of repairs to fencing. Andi Hunter, the current owner of Leewood House, collects the sheep
manure and sells it to local allotment owners for £1 a bag.
Three months before Leewood House was put on the market, Andi built the granny annexe in the
rear of the property. The annexe does not have its own entrance but does have a locked door
leading off the hallway to the main house. It is estimated that around 20% of the purchase price is
attributable to the annexe.
Andi has been using the converted part of the barn as an office and has been running a consultancy
business from there for the last 12 months. Clients occasionally visit the office in the barn.
There are two options in respect of the acquisition:
1) Propz Ltd buys it. In this scenario, Propz Ltd would take possession of the property following
completion of the contract with Andi, and either:
(a) Let the whole house and granny annexe to a third party as part of its property rental
business, or
(b) Run the main house as a bed and breakfast. Each room has its own ensuite and the
main house could easily be used as a bed and breakfast. Albert’s and Josef’s sister
(Agatha), who works for the company, would manage it for Propz Ltd, and would live rent
free in the granny annexe.
In either case, Propz Ltd would convert the unconverted part of the barn and then use the
whole barn for staff training.
2) Albert buys it personally. Albert recently divorced and transferred his old house to his former
spouse as part of the divorce settlement. Following discussions with Andi, Albert could move
in at exchange of contracts. Andi would require a deposit of £75,000 on exchange, with the
balance being held by Albert’s solicitor, to be paid on completion 28 days later.
Albert and Josef are unsure of the Stamp Duty Land Tax implications of the above options.
Requirement:
Explain the Stamp Duty Land Tax liability arising under each option for the purchase of
Leewood House.
(15)
Page 4 of 7 AT DIT
ADVANCED TECHNICAL
Domestic Indirect Taxation
November 2022
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.
• 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.
• Additional marks may be awarded for presentation.
• You must type your answer in the space on the screen as indicated by the Exam4 guidance.
,1. Animal Valley Ltd is a not-for-profit company limited by guarantee, with some of its work funded by
grants and donations. It operates a sanctuary for small species including lemurs, otters, meerkats,
birds and wildcats, and is open daily for admission by the general public. Its constitution provides
that it will be non-profit making with any surpluses being re-invested into the activities. Management
is undertaken by a small board of volunteers who have no financial interest in the sanctuary.
A new experience being offered has proven to be very popular with visitors, involving close
interaction and feeding the meerkats and lemurs. The income from these experiences, along with
the admission income, helps towards funding the sanctuary’s growth.
A small part of the sanctuary housing five African wildcats is currently closed to visitors. The animals
were imported from Africa and are being quarantined whilst further research is undertaken on the
species, and their breeding habits. This work is being funded by a conservation grant. It is hoped
that the enclosure housing the African wildcats will be open to visitors in 2023 or 2024.
In order to develop the sanctuary’s site and ability to house more animals, it needs to increase its
revenue. To do so, it has obtained bank finance to:
1) Increase its car park from 25 to 60 spaces (£80,000),
2) Add a small café and gift shop and extend the existing toilet block, (£200,000), and
3) Improve the African wildcat enclosure, which is currently closed to the public (£50,000). This
area requires significant landscaping work but represents a small proportion (around 10%) of
the sanctuary’s total site.
All amounts are VAT exclusive. The works will start in January 2023 and will take approximately
two months to complete.
Income for the year ended 31 May 2022, and forecast income for the following two years is:
Income Stream 31 May 22 31 May 23 31 May 24
£ £ £
Donations 45,000 50,000 55,000
Entry Fees 225,000 300,000 560,000
Conservation Grant 0 100,000 0
Animal Experiences 40,000 60,000 85,000
Café & Gift Shop N/A 50,000 360,000
Car parking 18,700 29,500 46,750
Total £328,700 £992,500 £1,081,750
The sanctuary is not yet registered for VAT, but has been considering whether, in light of the above
plans, it should be. The sanctuary wants to understand what registering will mean for it on an
on-going basis, and the extent to which it might recover VAT on the building work and running
costs.
Requirement:
Discuss, with reference to relevant case law, the consequences of VAT registration for
Animal Valley Ltd and make appropriate recommendations to maximise the recovery of
input tax. (15)
Page 2 of 7 AT DIT
,2. Ffion is a qualified Physiotherapist. She is currently working for the NHS but wants to become self-
employed in February 2023 using some money she inherited on the death of her aunt.
Her intention is to provide ‘whole mind and body experience’ sessions, which would include
physiotherapy, nutritional advice and mindfulness. Initially she will provide these to private
individuals from her home. She will purchase a wooden cabin and pay for a firm to erect it at the
bottom of her garden. Where a client cannot travel to see Ffion, she will provide her service in a
client’s own home. She is looking at a combi-van vehicle which has rear seats that fold down so it
is large enough for her to fit her physio table in.
Ffion is unsure how to structure her pricing. She is thinking of charging a flat rate fee of £65 an
hour for her services, and any products that the clients wish to purchase would be invoiced
separately. The client would pay £50 for an introductory session, at which it would be decided what
they wanted out of each subsequent session, and how many sessions they would require.
A typical session is likely to include:
45 minutes of physiotherapy
10 minutes of relaxation techniques
5 minutes nutritional advice
Ffion will have a range of products to sell. Edible face creams are currently a trend with celebrities.
They are predominantly made from a flavoured natural set yogurt, with real fruit pieces in them.
They retail at £20 a tub. Ffion is thinking of some introductory offers for her products. She can sell
a case of 50 lavender spray mists for £300 (£6 each), instead of individually for £8 each. She will
also do a ‘£30 deal’ whereby a client can purchase a face cream, a mindfulness CD (sold
individually for £10), and a spray mist will be included “for free”.
Ffion’s friend Elsa is the CEO of a large finance company, F12X Ltd, and is interested in paying
her to lead well-being sessions for its staff. F12X Ltd has offices in 16 UK cities and Ffion would be
paid £2,000 a day to provide advice on how a person can look after their own physical and
emotional well-being. Ffion would look at marketing this service to other companies.
Ffion has written a business plan and estimates that her income from private individuals could be
£60,000 a year for services and £10,000 for products sold with a further £58,000 from the corporate
work. Ffion does not want to register for VAT as she wants to remain as competitive as possible
with the supplies to private individuals. She wishes to ascertain whether she can structure her
business in such a way that she will not be required to register.
Requirement:
Discuss the VAT implications of Ffion’s proposed business venture. (20)
Page 3 of 7 AT DIT
, 3. Albert and Josef are brothers and each own 50% of Propz Ltd. Propz Ltd owns a portfolio of
residential and commercial properties that are rented out to individuals and businesses. It has 20
staff. Both brothers and the company are UK resident.
Albert and Josef want to expand Propz Ltd’s portfolio and have identified a property, Leewood
House, to buy at a cost of £510,000. Alternatively, Albert is looking for a new home and this property
may potentially be suitable for him. It is a four bedroomed dwelling, fully furnished with carpets,
curtains and other free-standing furniture. The market value of the carpets, curtains and free-
standing furniture included with the house is £20,000.
The house contains a “granny annexe”, has a 1,500 square feet barn in the grounds (part of which
has been converted into an office) and is surrounded by two acres of land. Leewood House has
been marketed by the estate agents as ‘a fantastic home with a business opportunity for the right
buyer!’
The land is currently let to a local farmer to graze his sheep. The farmer pays rent of £2 a week per
sheep and there are around 15 sheep grazing most of the year. The income is used to cover the
cost of repairs to fencing. Andi Hunter, the current owner of Leewood House, collects the sheep
manure and sells it to local allotment owners for £1 a bag.
Three months before Leewood House was put on the market, Andi built the granny annexe in the
rear of the property. The annexe does not have its own entrance but does have a locked door
leading off the hallway to the main house. It is estimated that around 20% of the purchase price is
attributable to the annexe.
Andi has been using the converted part of the barn as an office and has been running a consultancy
business from there for the last 12 months. Clients occasionally visit the office in the barn.
There are two options in respect of the acquisition:
1) Propz Ltd buys it. In this scenario, Propz Ltd would take possession of the property following
completion of the contract with Andi, and either:
(a) Let the whole house and granny annexe to a third party as part of its property rental
business, or
(b) Run the main house as a bed and breakfast. Each room has its own ensuite and the
main house could easily be used as a bed and breakfast. Albert’s and Josef’s sister
(Agatha), who works for the company, would manage it for Propz Ltd, and would live rent
free in the granny annexe.
In either case, Propz Ltd would convert the unconverted part of the barn and then use the
whole barn for staff training.
2) Albert buys it personally. Albert recently divorced and transferred his old house to his former
spouse as part of the divorce settlement. Following discussions with Andi, Albert could move
in at exchange of contracts. Andi would require a deposit of £75,000 on exchange, with the
balance being held by Albert’s solicitor, to be paid on completion 28 days later.
Albert and Josef are unsure of the Stamp Duty Land Tax implications of the above options.
Requirement:
Explain the Stamp Duty Land Tax liability arising under each option for the purchase of
Leewood House.
(15)
Page 4 of 7 AT DIT
