THE CHARTERED INSTITUTE OF TAXATION
ADVANCED TECHNICAL
Taxation of Individuals
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. Wesley Turner is a UK resident and domiciled individual. He is a higher rate taxpayer who owns a
large portfolio of commercial properties as well as shares in KG Ltd, a successful engineering
company.
In May 2021, one of his properties was damaged in a fire. Immediately after the fire, the property
was valued at £145,000. He claimed £80,000 on his insurance and spent £68,500 of this restoring
the property. After the restoration was completed in February 2022, the property was valued at
£265,000. He had originally purchased the building in July 2007 for £171,450.
In November 2021, Wesley gifted 1,000 shares in KG Ltd to each of his two daughters, Khloe and
Grace. Khloe is a UK resident and Grace is a Spanish resident. A holding of 1,000 shares in the
company was valued at £18,250 when the gifts were made.
Wesley originally incorporated KG Ltd in October 2003, subscribing for all 5,000 ordinary £1 shares
at their nominal value. The company’s most recent balance sheet showed the following assets:
£
Freehold property 620,985
Three small storage units 90,000
Cash at bank 326,721
The small storage units are let to a third party. The freehold property is used for the purposes of
the trade.
On 1 April 2022, Wesley sub-let a building to an unconnected third party, granting them a 15 year
lease in return for a premium of £35,000. Wesley paid £60,000 for a 35 year lease on this building
on 1 January 2005 and pays the same annual rent to his landlord as his tenant will pay to him under
the terms of the sub-lease.
At 6 April 2021, Wesley had capital losses brought forward of £2,740 and he has previously used
up his full lifetime allowance for Business Asset Disposal Relief.
Requirement:
Calculate, with explanations, Wesley’s Capital Gains Tax liability for 2021/22 assuming that
he takes advantage of all available elections. (20)
,2. Sofia Meier has been resident in the UK since 6 April 2014 but she has a domicile of origin in
Notopia and still considers herself domiciled there.
Sofia owns 100% of the shares in SolProp Ltd, a Notopian incorporated and tax resident limited
company. Sofia inherited these shares from her father on his death in 2013, when they were worth
£560,000.
SolProp Ltd’s only asset is a residential property located in Notopia, which it acquired for £410,000
in 2008. The company’s only liability is a mortgage secured on the property of £270,000. The
company does not have a trade or any business activity. The property has never been Sofia’s main
residence and it has never been rented out. It has been used by various family members for holiday
purposes. Many years ago, Sofia’s father told her that setting up the company would reduce his UK
Capital Gains Tax liabilities as he was UK resident at the time.
Sofia would now like to buy a new home in the UK, but she needs to raise funds to do so. She
would like SolProp Ltd to sell the Notopian property and then she would extract all of the sale
proceeds from the company in order to acquire the UK property. SolProp Ltd has received an offer
of £980,000 for the Notopian property. The buyer wants direct ownership of the property and does
not want to buy the company shares. No foreign tax will be payable on the disposal.
Requirement:
Explain the UK tax implications for Sofia of the proposed sale and the subsequent extraction
of funds. Calculations are not required. (15)
, 3. Abdul is domiciled in Ruritania but has been UK resident since 2009. He claims the remittance
basis.
On 30 April 2021, Abdul borrowed £600,000 from an offshore bank. The funds were paid to a new
UK bank account on 1 May 2021. The loan was secured against his Ruritanian house which he
purchased using £1 million of foreign income which had arisen since 2010 and was never remitted
to the UK. No foreign taxes have been paid on the income. From the funds paid into his UK bank
account, he made the following investments:
1) On 1 May 2021, Abdul made a loan of £300,000 to Jafar Property Investments Ltd, a UK
unquoted company. The company rents out residential properties in London. Jafar Property
Investments Ltd pays interest to Abdul at a commercial rate.
2) On 1 June 2021, Abdul used £50,000 to subscribe for a 10% shareholding in Karim and
Abdul Ltd, a UK close company which operates a restaurant business. The company has
issued an EIS3 to Abdul in respect of his investment. Abdul became a non-executive director
of the company on 1 August 2021.
3) On 2 June 2021, Abdul used £225,000 to acquire an interest in Altaf Clothing, a UK
partnership which carries on a clothing manufacturing business.
4) On 1 August 2021, Abdul used £25,000 to subscribe for shares in Snazzy Computers Ltd, a
company which carries on the business of providing specialist technological services. The
shares are listed on AIM.
On 16 December 2021, Abdul sold 250 shares in Abdul and Hussain Ltd, a UK company which
manufactures furniture, for £325,000. Abdul is a director of the company. Abdul used the proceeds
to make investments in UK companies listed on the London Stock exchange.
Abdul had acquired 1,000 shares in Abdul and Hussain Ltd on 1 January 2021 for £1 million. In
order to make the investment, he transferred £1 million to the UK on that date from an account in
Ruritania. Immediately prior to the transfer, the balance of this account was £2 million, which
comprised £600,000 of foreign income and £1,400,000 of foreign gains on which Abdul had
originally claimed the remittance basis.
Requirement:
Discuss the availability of Business Investment Relief and other tax matters related to the
above transactions. (15)
ADVANCED TECHNICAL
Taxation of Individuals
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. Wesley Turner is a UK resident and domiciled individual. He is a higher rate taxpayer who owns a
large portfolio of commercial properties as well as shares in KG Ltd, a successful engineering
company.
In May 2021, one of his properties was damaged in a fire. Immediately after the fire, the property
was valued at £145,000. He claimed £80,000 on his insurance and spent £68,500 of this restoring
the property. After the restoration was completed in February 2022, the property was valued at
£265,000. He had originally purchased the building in July 2007 for £171,450.
In November 2021, Wesley gifted 1,000 shares in KG Ltd to each of his two daughters, Khloe and
Grace. Khloe is a UK resident and Grace is a Spanish resident. A holding of 1,000 shares in the
company was valued at £18,250 when the gifts were made.
Wesley originally incorporated KG Ltd in October 2003, subscribing for all 5,000 ordinary £1 shares
at their nominal value. The company’s most recent balance sheet showed the following assets:
£
Freehold property 620,985
Three small storage units 90,000
Cash at bank 326,721
The small storage units are let to a third party. The freehold property is used for the purposes of
the trade.
On 1 April 2022, Wesley sub-let a building to an unconnected third party, granting them a 15 year
lease in return for a premium of £35,000. Wesley paid £60,000 for a 35 year lease on this building
on 1 January 2005 and pays the same annual rent to his landlord as his tenant will pay to him under
the terms of the sub-lease.
At 6 April 2021, Wesley had capital losses brought forward of £2,740 and he has previously used
up his full lifetime allowance for Business Asset Disposal Relief.
Requirement:
Calculate, with explanations, Wesley’s Capital Gains Tax liability for 2021/22 assuming that
he takes advantage of all available elections. (20)
,2. Sofia Meier has been resident in the UK since 6 April 2014 but she has a domicile of origin in
Notopia and still considers herself domiciled there.
Sofia owns 100% of the shares in SolProp Ltd, a Notopian incorporated and tax resident limited
company. Sofia inherited these shares from her father on his death in 2013, when they were worth
£560,000.
SolProp Ltd’s only asset is a residential property located in Notopia, which it acquired for £410,000
in 2008. The company’s only liability is a mortgage secured on the property of £270,000. The
company does not have a trade or any business activity. The property has never been Sofia’s main
residence and it has never been rented out. It has been used by various family members for holiday
purposes. Many years ago, Sofia’s father told her that setting up the company would reduce his UK
Capital Gains Tax liabilities as he was UK resident at the time.
Sofia would now like to buy a new home in the UK, but she needs to raise funds to do so. She
would like SolProp Ltd to sell the Notopian property and then she would extract all of the sale
proceeds from the company in order to acquire the UK property. SolProp Ltd has received an offer
of £980,000 for the Notopian property. The buyer wants direct ownership of the property and does
not want to buy the company shares. No foreign tax will be payable on the disposal.
Requirement:
Explain the UK tax implications for Sofia of the proposed sale and the subsequent extraction
of funds. Calculations are not required. (15)
, 3. Abdul is domiciled in Ruritania but has been UK resident since 2009. He claims the remittance
basis.
On 30 April 2021, Abdul borrowed £600,000 from an offshore bank. The funds were paid to a new
UK bank account on 1 May 2021. The loan was secured against his Ruritanian house which he
purchased using £1 million of foreign income which had arisen since 2010 and was never remitted
to the UK. No foreign taxes have been paid on the income. From the funds paid into his UK bank
account, he made the following investments:
1) On 1 May 2021, Abdul made a loan of £300,000 to Jafar Property Investments Ltd, a UK
unquoted company. The company rents out residential properties in London. Jafar Property
Investments Ltd pays interest to Abdul at a commercial rate.
2) On 1 June 2021, Abdul used £50,000 to subscribe for a 10% shareholding in Karim and
Abdul Ltd, a UK close company which operates a restaurant business. The company has
issued an EIS3 to Abdul in respect of his investment. Abdul became a non-executive director
of the company on 1 August 2021.
3) On 2 June 2021, Abdul used £225,000 to acquire an interest in Altaf Clothing, a UK
partnership which carries on a clothing manufacturing business.
4) On 1 August 2021, Abdul used £25,000 to subscribe for shares in Snazzy Computers Ltd, a
company which carries on the business of providing specialist technological services. The
shares are listed on AIM.
On 16 December 2021, Abdul sold 250 shares in Abdul and Hussain Ltd, a UK company which
manufactures furniture, for £325,000. Abdul is a director of the company. Abdul used the proceeds
to make investments in UK companies listed on the London Stock exchange.
Abdul had acquired 1,000 shares in Abdul and Hussain Ltd on 1 January 2021 for £1 million. In
order to make the investment, he transferred £1 million to the UK on that date from an account in
Ruritania. Immediately prior to the transfer, the balance of this account was £2 million, which
comprised £600,000 of foreign income and £1,400,000 of foreign gains on which Abdul had
originally claimed the remittance basis.
Requirement:
Discuss the availability of Business Investment Relief and other tax matters related to the
above transactions. (15)
