THE CHARTERED INSTITUTE OF TAXATION
APPLICATION AND PROFESSIONAL SKILLS
Taxation of Individuals
November 2022
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.
• 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.
• You must type your answer in the space on the screen as indicated by the Exam4 guidance.
,You are a tax manager in a firm of Chartered Tax Advisers. You have recently met with a long-standing
client of the firm, Jeff Stones (EXHIBIT A).
Jeff is currently a senior manager of Parsons Construction Ltd. Recently, Jeff has not been able to agree
with his colleagues in the senior management team over the future direction of the company, so it has
been mutually agreed that he will be made redundant on 1 January 2023.
After leaving Parsons Construction Ltd, Jeff plans to take six months off work and then start his own
business as a consultant.
The following exhibits are provided to assist you:
EXHIBIT A: Notes of a meeting with Jeff
EXHIBIT B: Extract from Jeff’s termination agreement
EXHIBIT C: Letter to Jeff concerning the Parsons Construction Ltd Share Award
EXHIBIT D: Pre-seen information
Requirement:
Prepare a draft report for Jeff advising on how he might optimise his tax position in 2022/23 and
2023/24.
Continued
Page 2 of 7 APS IND
,Continuation
EXHIBIT A
Notes of a meeting with Jeff
Date: 30 October 2022
Jeff said that Parsons Construction Ltd has struggled to recover from the coronavirus pandemic and Jeff
feels that in order for the business to survive it needs more investment and to expand into commercial
construction. However, the board feel that this is too risky because of the uncertain future of office working.
After several meetings, Jeff decided that he no longer felt able to continue with Parsons Construction Ltd
and the decision was reached with the board that Jeff should part ways with the company. This suited
Jeff as he had always wanted to start his own management consultancy business. He plans to take a
short break from work, then start trading as a management consultant in July 2023.
Jeff has come to us for tax advice on his termination package (EXHIBIT B), including guidance on when
and how he should exercise his share award.
Jeff confirmed that the company is profitable and has gross assets of around £5 million. However, he is a
little pessimistic about the future value of the company share price. Jeff estimates that this is likely to fall
by between 5% and 10% over the next six months. The share price at 30 October 2022 was £12.48 per
share.
The amount payable under the bonus arrangement depends on the company’s performance in the three
years to 30 June 2023. Jeff expects the pro-rated amount due to him to be in the region of £100,000.
He is uncertain what his profits will be from his management consultancy business in 2023/24, but he
expects they will be about £20,000. He plans to operate as a sole trader.
Jeff would like to make some investments out of the money he is due to receive from Parsons Construction
Ltd. The investments he would like to make are:
1) £20,000 gross contribution into his pension (basic rate tax relief is not reclaimed by his pension
provider and no annual allowance charge would arise as a result of this contribution); and
2) £30,000 subscription for shares in either a qualifying Enterprise Investment Scheme company or
Venture Capital Trust; he is not sure which.
He would also like to make a £10,000 charitable donation to Greenpeace.
Jeff would like to know how he can maximise the tax relief he might get as a consequence of the above
payments.
Continued
Page 3 of 7 APS IND
, Continuation
EXHIBIT B
Extract from Jeff's termination agreement
Termination Payment
1) Provided that the Employee has complied with the Employee’s obligations under this Agreement, the
Company shall pay to the Employee the following sums (the “Termination Payment”):
(a) £25,000 in lieu of notice (the “Payment in Lieu of Notice”), which represents the pay the Employee
would have been contractually entitled to receive during the Employee’s notice period; and
(b) £62,500 as ex-gratia compensation for loss of employment, which is made without admission of
liability (the “Compensation Payment”).
2) The Employee acknowledges that no other payments or benefits of any kind are due from the
Company or any Associated Company except as provided for in this Agreement.
Share Award
1) The share award (the “Award”) is governed by the rules of the Parsons Construction Ltd Share
Plan, which provide that in certain circumstances participants may be treated as “good leavers”.
The Company confirms that, upon completion of this Agreement, the Employee will be treated as
a “good leaver” on the Termination Date for the purposes of the Award.
2) In accordance with these rules and the terms of the Award, the Award will be pro-rated based on
the Termination Date, which for the purposes of the rules will constitute the Accelerated Vesting
Date.
Bonus Arrangement
1) The Employee is also party to a bonus arrangement (the “Arrangement”) based on the performance
of the company from 1 July 2020 to 30 June 2023. The bonus is due to be paid on 30 December
2023. The Company confirms that, upon completion of this Agreement, the Employee will class the
employee as a “good leaver” as defined in the terms and conditions of the Arrangement, such that
a pro-rated amount will continue to be payable on 30 December 2023.
Continued
Page 4 of 7 APS IND
APPLICATION AND PROFESSIONAL SKILLS
Taxation of Individuals
November 2022
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.
• 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.
• You must type your answer in the space on the screen as indicated by the Exam4 guidance.
,You are a tax manager in a firm of Chartered Tax Advisers. You have recently met with a long-standing
client of the firm, Jeff Stones (EXHIBIT A).
Jeff is currently a senior manager of Parsons Construction Ltd. Recently, Jeff has not been able to agree
with his colleagues in the senior management team over the future direction of the company, so it has
been mutually agreed that he will be made redundant on 1 January 2023.
After leaving Parsons Construction Ltd, Jeff plans to take six months off work and then start his own
business as a consultant.
The following exhibits are provided to assist you:
EXHIBIT A: Notes of a meeting with Jeff
EXHIBIT B: Extract from Jeff’s termination agreement
EXHIBIT C: Letter to Jeff concerning the Parsons Construction Ltd Share Award
EXHIBIT D: Pre-seen information
Requirement:
Prepare a draft report for Jeff advising on how he might optimise his tax position in 2022/23 and
2023/24.
Continued
Page 2 of 7 APS IND
,Continuation
EXHIBIT A
Notes of a meeting with Jeff
Date: 30 October 2022
Jeff said that Parsons Construction Ltd has struggled to recover from the coronavirus pandemic and Jeff
feels that in order for the business to survive it needs more investment and to expand into commercial
construction. However, the board feel that this is too risky because of the uncertain future of office working.
After several meetings, Jeff decided that he no longer felt able to continue with Parsons Construction Ltd
and the decision was reached with the board that Jeff should part ways with the company. This suited
Jeff as he had always wanted to start his own management consultancy business. He plans to take a
short break from work, then start trading as a management consultant in July 2023.
Jeff has come to us for tax advice on his termination package (EXHIBIT B), including guidance on when
and how he should exercise his share award.
Jeff confirmed that the company is profitable and has gross assets of around £5 million. However, he is a
little pessimistic about the future value of the company share price. Jeff estimates that this is likely to fall
by between 5% and 10% over the next six months. The share price at 30 October 2022 was £12.48 per
share.
The amount payable under the bonus arrangement depends on the company’s performance in the three
years to 30 June 2023. Jeff expects the pro-rated amount due to him to be in the region of £100,000.
He is uncertain what his profits will be from his management consultancy business in 2023/24, but he
expects they will be about £20,000. He plans to operate as a sole trader.
Jeff would like to make some investments out of the money he is due to receive from Parsons Construction
Ltd. The investments he would like to make are:
1) £20,000 gross contribution into his pension (basic rate tax relief is not reclaimed by his pension
provider and no annual allowance charge would arise as a result of this contribution); and
2) £30,000 subscription for shares in either a qualifying Enterprise Investment Scheme company or
Venture Capital Trust; he is not sure which.
He would also like to make a £10,000 charitable donation to Greenpeace.
Jeff would like to know how he can maximise the tax relief he might get as a consequence of the above
payments.
Continued
Page 3 of 7 APS IND
, Continuation
EXHIBIT B
Extract from Jeff's termination agreement
Termination Payment
1) Provided that the Employee has complied with the Employee’s obligations under this Agreement, the
Company shall pay to the Employee the following sums (the “Termination Payment”):
(a) £25,000 in lieu of notice (the “Payment in Lieu of Notice”), which represents the pay the Employee
would have been contractually entitled to receive during the Employee’s notice period; and
(b) £62,500 as ex-gratia compensation for loss of employment, which is made without admission of
liability (the “Compensation Payment”).
2) The Employee acknowledges that no other payments or benefits of any kind are due from the
Company or any Associated Company except as provided for in this Agreement.
Share Award
1) The share award (the “Award”) is governed by the rules of the Parsons Construction Ltd Share
Plan, which provide that in certain circumstances participants may be treated as “good leavers”.
The Company confirms that, upon completion of this Agreement, the Employee will be treated as
a “good leaver” on the Termination Date for the purposes of the Award.
2) In accordance with these rules and the terms of the Award, the Award will be pro-rated based on
the Termination Date, which for the purposes of the rules will constitute the Accelerated Vesting
Date.
Bonus Arrangement
1) The Employee is also party to a bonus arrangement (the “Arrangement”) based on the performance
of the company from 1 July 2020 to 30 June 2023. The bonus is due to be paid on 30 December
2023. The Company confirms that, upon completion of this Agreement, the Employee will class the
employee as a “good leaver” as defined in the terms and conditions of the Arrangement, such that
a pro-rated amount will continue to be payable on 30 December 2023.
Continued
Page 4 of 7 APS IND
