THE CHARTERED INSTITUTE OF TAXATION
ADVANCED TECHNICAL
Taxation of Major Corporates
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. The Ambrose group is a multinational group that manufactures and sells alcoholic drinks. Its group
structure is as follows:
Ambrose Inc
(Atlantis)
Gold Agave SA Wild West Inc Ambrose Ltd
(Mexico) (US) (UK)
The companies in the Ambrose group are tax resident in the countries stated in the group
structure diagram and all subsidiaries are 100% owned.
Country Double Tax Agreement Non-discrimination Corporate income
(DTA) with UK article in DTA tax rate
Atlantis No n/a 7.5%
Mexico Yes Yes 30%
US Yes Yes 21%
Ambrose Inc was founded in 1955. Since then, it has produced Ambrose Rum, a unique Atlantan
spiced rum. Ambrose Inc owns the recipe and all worldwide trademarks for Ambrose Rum. It
employs staff in Atlantis who are responsible for developing, enhancing, managing and protecting
the Ambrose rum recipes and trademarks.
In 2003, Ambrose Inc purchased Gold Agave SA, a maker of tequila under the Gold Agave brand
and immediately purchased the recipe and all worldwide trademarks for Gold Agave tequila from
Gold Agave SA.
In 2017, Ambrose Inc purchased Wild West Inc, a maker of whiskey under the Wild West brand.
Wild West Inc still owns the recipe and all worldwide trademarks for Wild West whiskey.
Ambrose Ltd (incorporated by Ambrose Inc in 1995) manufactures spirits in the UK for sale to third
party customers in the UK and Europe. It pays Ambrose Inc and Wild West Inc royalties for licenses
to use the recipes and trademarks mentioned above. The royalties are paid annually on 5 April, for
the year to 5 April.
During the year ended 5 April 2022 Ambrose Ltd made the following sales and royalty payments
resulting in the net income for the licensor as shown:
Ambrose Gold Agave Wild West Total
rum tequila whiskey
£ million £ million £ million £ million
UK sales 100 100 10 210
EU sales 100 150 0 250
Total sales by Ambrose Ltd 200 250 10 460
Royalty paid by Ambrose Ltd 20 25 3 48
Expenses incurred by licensor (2) (3) (2) (7)
Net income of licensor 18 22 1 41
(Ambrose Inc/Wild West Inc)
Ambrose Ltd intends to build new manufacturing facilities. It is considering partly financing the
construction costs by borrowing £20 million from Ambrose Inc on 1 January 2023. The proposed
loan would be subject to interest at a rate of 5% per annum, payable on 31 December in arrears.
Requirement:
1) Calculate, with explanations, the UK tax suffered by Ambrose Inc and Wild West Inc
for the year ended 5 April 2022. (10)
2) Explain the UK tax administration and payment requirements that Ambrose Inc must
comply with for the year ended 5 April 2022. (2)
3) Explain the potential UK withholding tax implications of the proposed £20 million loan,
including administration requirements, and how they could be mitigated. (3)
Total (15)
,2. Bentham Ltd is a UK resident company. It runs a retail business that sells groceries, home products
and clothes to consumers through a chain of superstores.
Bentham Ltd is managed and primarily operates in the UK, but also has several stores in the
Netherlands, which constitute a permanent establishment and their profits are subject to tax in the
Netherlands.
Bentham Ltd’s income statement for the year ended 31 December 2021 was as follows:
UK operations Netherands Total Notes
PE
£million £million £million
Sales 4,500 500 5,000
Cost of sales (4,275) (475) (4,750)
Gross profit 225 25 250
Other operating income 15 - 15 1
Other operating (150) - (150) 2
expenses
Depreciation (180) (20) (200)
Operating profit/(loss) (90) 5 (85)
Investment income 10 - 10 3
Loan released 300 - 300 4
Interest payable (2) - (2)
Profit before tax 218 5 223
Notes
1) Other operating income comprises:
(a) £10 million received by Bentham Ltd under a business disruption insurance policy,
compensating it for the cost of providing personal protective equipment and Covid tests
to employees.
(b) £5 million received by Bentham Ltd in consideration for granting a 10-year lease over
the south wing of its head office building to a third party. Bentham Ltd owns the building.
2) Other operating expenses includes:
(a) Legal fees of £500,000 relating to an issue of new shares by Bentham Ltd to its existing
investors.
(b) Criminal fine of £1 million imposed on Bentham Ltd by a UK court on 14 March 2021 for
illegally dumping waste in breach of environmental regulations.
(c) Accounting expense of £4 million relating to Bentham Ltd’s registered employee pension
scheme. Bentham Ltd paid cash contributions of £2.5 million to the scheme during the
year ended 31 December 2021, in line with the level of contributions in previous years.
(d) Bonus of £400,000 awarded to Bentham Ltd’s Managing Director which will be paid in
cash on 31 December 2022.
3) Investment income is a dividend received on 1 April 2021 from West DIY Ltd, a company in
which Bentham Ltd has an 8% shareholding.
4) Bentham Ltd’s main creditor is Archbold Bank plc, an independent third party. On 1 January
2021 Archbold Bank plc entered into an agreement with Bentham Ltd. Under that agreement
Archbold Bank plc released a £300 million loan owed to it by Bentham Ltd in exchange for
newly issued ordinary shares in Bentham Ltd with a nominal value of £100 million. Bentham
Ltd applies an amortised cost method of accounting to all of its loan relationships. Bentham
Ltd’s income statement includes a £300 million credit in respect of the loan release.
5) Bentham Ltd had a main capital allowances pool with tax written down value brought forward
of £10 million as at 1 January 2021, all of which related to UK operations. On 31 January
2021, it spent £800,000 on new cleaning equipment and mobile hand sanitiser dispensers
for the UK stores.
6) Interest payable included £200,000 of late payment interest due to HMRC in respect of
Bentham Ltd’s Corporation Tax liabilities for prior years.
, 3. Whittle Ltd is a UK tax resident manufacturer of medical X-ray scanners. It prepares its accounts
for the year to 30 September.
For the accounting periods ended 30 September 2018, 30 September 2019 and 30 September
2020 Whittle Ltd’s taxable profits were £3 million per annum.
For the accounting periods ended 30 September 2021 and 30 September 2022, Whittle Ltd’s
provisional taxable profits, before capital allowances were deducted, were £1 million per annum.
Whittle Ltd expects to make taxable profits of £5 million in each accounting period thereafter.
During 2020, Whittle Ltd finalised the development of its latest product, the A500 scanner.
At 1 October 2020, the tax written down values brought forward of Whittle Ltd’s capital allowances
pools were as follows:
Plant and machinery pools TWDV b/f
£
Main 1,200,000
Special rate 400,000
On 20 January 2021, Whittle Ltd purchased a wholly electric lorry for £100,000 to transport the
A500 scanners to customers.
On 1 March 2021, Whittle Ltd entered into a contract with a third party to purchase assorted
equipment suitable for moving and packing the A500 scanners during the production process for
£1 million. The contract was conditional upon Whittle Ltd receiving regulatory approval for the A500
scanners, which was received on 30 April 2021.
Over a three-month period beginning on 1 May 2021, Whittle Ltd carried out a refit of its main
factory so that it would be suitable for producing the A500 scanners. This included replacing the
factory’s entire heating system and the installation of a ventilation system that cleans the factory
air to avoid the manufacturing process being contaminated with dust particles; installing these new
features cost £1.5 million.
On 14 May 2021, Whittle Ltd purchased the following items:
1) Precision engineering equipment used to manufacture scanners for £5 million.
2) A specialised storage cabinet required to safely store certain components of the A500 scanner.
The storage cabinet was purchased for £800,000 from a used equipment dealer.
3) Computer software used in the calibration and testing of the A500 scanner for £500,000.
4) Four cars costing £50,000 each, for use by the company’s four executive directors. The cars’
CO2 emissions rating is 42 g/km.
All of the items have an expected useful life of less than 20 years. Except where stated they were
purchased new.
On 12 November 2021, Whittle Ltd sold some testing machinery to a third party for £350,000. It
was originally purchased in 2017 for £300,000.
On 19 July 2022, Whittle Ltd sold a piece of the precision engineering equipment for £200,000. It
was originally purchased on 14 May 2021 for £225,000.
Requirement:
1) Calculate, with explanations, the maximum capital allowances that Whittle Ltd could
claim for the accounting periods ended 30 September 2021 and 30 September 2022.
(11)
2) Explain how Whittle Ltd could maximise the tax benefit of its allowances, including by
claiming loss relief. (4)
Total (15)
ADVANCED TECHNICAL
Taxation of Major Corporates
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. The Ambrose group is a multinational group that manufactures and sells alcoholic drinks. Its group
structure is as follows:
Ambrose Inc
(Atlantis)
Gold Agave SA Wild West Inc Ambrose Ltd
(Mexico) (US) (UK)
The companies in the Ambrose group are tax resident in the countries stated in the group
structure diagram and all subsidiaries are 100% owned.
Country Double Tax Agreement Non-discrimination Corporate income
(DTA) with UK article in DTA tax rate
Atlantis No n/a 7.5%
Mexico Yes Yes 30%
US Yes Yes 21%
Ambrose Inc was founded in 1955. Since then, it has produced Ambrose Rum, a unique Atlantan
spiced rum. Ambrose Inc owns the recipe and all worldwide trademarks for Ambrose Rum. It
employs staff in Atlantis who are responsible for developing, enhancing, managing and protecting
the Ambrose rum recipes and trademarks.
In 2003, Ambrose Inc purchased Gold Agave SA, a maker of tequila under the Gold Agave brand
and immediately purchased the recipe and all worldwide trademarks for Gold Agave tequila from
Gold Agave SA.
In 2017, Ambrose Inc purchased Wild West Inc, a maker of whiskey under the Wild West brand.
Wild West Inc still owns the recipe and all worldwide trademarks for Wild West whiskey.
Ambrose Ltd (incorporated by Ambrose Inc in 1995) manufactures spirits in the UK for sale to third
party customers in the UK and Europe. It pays Ambrose Inc and Wild West Inc royalties for licenses
to use the recipes and trademarks mentioned above. The royalties are paid annually on 5 April, for
the year to 5 April.
During the year ended 5 April 2022 Ambrose Ltd made the following sales and royalty payments
resulting in the net income for the licensor as shown:
Ambrose Gold Agave Wild West Total
rum tequila whiskey
£ million £ million £ million £ million
UK sales 100 100 10 210
EU sales 100 150 0 250
Total sales by Ambrose Ltd 200 250 10 460
Royalty paid by Ambrose Ltd 20 25 3 48
Expenses incurred by licensor (2) (3) (2) (7)
Net income of licensor 18 22 1 41
(Ambrose Inc/Wild West Inc)
Ambrose Ltd intends to build new manufacturing facilities. It is considering partly financing the
construction costs by borrowing £20 million from Ambrose Inc on 1 January 2023. The proposed
loan would be subject to interest at a rate of 5% per annum, payable on 31 December in arrears.
Requirement:
1) Calculate, with explanations, the UK tax suffered by Ambrose Inc and Wild West Inc
for the year ended 5 April 2022. (10)
2) Explain the UK tax administration and payment requirements that Ambrose Inc must
comply with for the year ended 5 April 2022. (2)
3) Explain the potential UK withholding tax implications of the proposed £20 million loan,
including administration requirements, and how they could be mitigated. (3)
Total (15)
,2. Bentham Ltd is a UK resident company. It runs a retail business that sells groceries, home products
and clothes to consumers through a chain of superstores.
Bentham Ltd is managed and primarily operates in the UK, but also has several stores in the
Netherlands, which constitute a permanent establishment and their profits are subject to tax in the
Netherlands.
Bentham Ltd’s income statement for the year ended 31 December 2021 was as follows:
UK operations Netherands Total Notes
PE
£million £million £million
Sales 4,500 500 5,000
Cost of sales (4,275) (475) (4,750)
Gross profit 225 25 250
Other operating income 15 - 15 1
Other operating (150) - (150) 2
expenses
Depreciation (180) (20) (200)
Operating profit/(loss) (90) 5 (85)
Investment income 10 - 10 3
Loan released 300 - 300 4
Interest payable (2) - (2)
Profit before tax 218 5 223
Notes
1) Other operating income comprises:
(a) £10 million received by Bentham Ltd under a business disruption insurance policy,
compensating it for the cost of providing personal protective equipment and Covid tests
to employees.
(b) £5 million received by Bentham Ltd in consideration for granting a 10-year lease over
the south wing of its head office building to a third party. Bentham Ltd owns the building.
2) Other operating expenses includes:
(a) Legal fees of £500,000 relating to an issue of new shares by Bentham Ltd to its existing
investors.
(b) Criminal fine of £1 million imposed on Bentham Ltd by a UK court on 14 March 2021 for
illegally dumping waste in breach of environmental regulations.
(c) Accounting expense of £4 million relating to Bentham Ltd’s registered employee pension
scheme. Bentham Ltd paid cash contributions of £2.5 million to the scheme during the
year ended 31 December 2021, in line with the level of contributions in previous years.
(d) Bonus of £400,000 awarded to Bentham Ltd’s Managing Director which will be paid in
cash on 31 December 2022.
3) Investment income is a dividend received on 1 April 2021 from West DIY Ltd, a company in
which Bentham Ltd has an 8% shareholding.
4) Bentham Ltd’s main creditor is Archbold Bank plc, an independent third party. On 1 January
2021 Archbold Bank plc entered into an agreement with Bentham Ltd. Under that agreement
Archbold Bank plc released a £300 million loan owed to it by Bentham Ltd in exchange for
newly issued ordinary shares in Bentham Ltd with a nominal value of £100 million. Bentham
Ltd applies an amortised cost method of accounting to all of its loan relationships. Bentham
Ltd’s income statement includes a £300 million credit in respect of the loan release.
5) Bentham Ltd had a main capital allowances pool with tax written down value brought forward
of £10 million as at 1 January 2021, all of which related to UK operations. On 31 January
2021, it spent £800,000 on new cleaning equipment and mobile hand sanitiser dispensers
for the UK stores.
6) Interest payable included £200,000 of late payment interest due to HMRC in respect of
Bentham Ltd’s Corporation Tax liabilities for prior years.
, 3. Whittle Ltd is a UK tax resident manufacturer of medical X-ray scanners. It prepares its accounts
for the year to 30 September.
For the accounting periods ended 30 September 2018, 30 September 2019 and 30 September
2020 Whittle Ltd’s taxable profits were £3 million per annum.
For the accounting periods ended 30 September 2021 and 30 September 2022, Whittle Ltd’s
provisional taxable profits, before capital allowances were deducted, were £1 million per annum.
Whittle Ltd expects to make taxable profits of £5 million in each accounting period thereafter.
During 2020, Whittle Ltd finalised the development of its latest product, the A500 scanner.
At 1 October 2020, the tax written down values brought forward of Whittle Ltd’s capital allowances
pools were as follows:
Plant and machinery pools TWDV b/f
£
Main 1,200,000
Special rate 400,000
On 20 January 2021, Whittle Ltd purchased a wholly electric lorry for £100,000 to transport the
A500 scanners to customers.
On 1 March 2021, Whittle Ltd entered into a contract with a third party to purchase assorted
equipment suitable for moving and packing the A500 scanners during the production process for
£1 million. The contract was conditional upon Whittle Ltd receiving regulatory approval for the A500
scanners, which was received on 30 April 2021.
Over a three-month period beginning on 1 May 2021, Whittle Ltd carried out a refit of its main
factory so that it would be suitable for producing the A500 scanners. This included replacing the
factory’s entire heating system and the installation of a ventilation system that cleans the factory
air to avoid the manufacturing process being contaminated with dust particles; installing these new
features cost £1.5 million.
On 14 May 2021, Whittle Ltd purchased the following items:
1) Precision engineering equipment used to manufacture scanners for £5 million.
2) A specialised storage cabinet required to safely store certain components of the A500 scanner.
The storage cabinet was purchased for £800,000 from a used equipment dealer.
3) Computer software used in the calibration and testing of the A500 scanner for £500,000.
4) Four cars costing £50,000 each, for use by the company’s four executive directors. The cars’
CO2 emissions rating is 42 g/km.
All of the items have an expected useful life of less than 20 years. Except where stated they were
purchased new.
On 12 November 2021, Whittle Ltd sold some testing machinery to a third party for £350,000. It
was originally purchased in 2017 for £300,000.
On 19 July 2022, Whittle Ltd sold a piece of the precision engineering equipment for £200,000. It
was originally purchased on 14 May 2021 for £225,000.
Requirement:
1) Calculate, with explanations, the maximum capital allowances that Whittle Ltd could
claim for the accounting periods ended 30 September 2021 and 30 September 2022.
(11)
2) Explain how Whittle Ltd could maximise the tax benefit of its allowances, including by
claiming loss relief. (4)
Total (15)
