THE CHARTERED INSTITUTE OF TAXATION
ADVANCED TECHNICAL
Taxation of Major Corporates
May 2021
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.
• 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.
,1. Camlann Group SA has been a provider of desktop property valuations for insurance
companies for many years. The company was incorporated within Badon, a small EU
country and is tax resident there.
It was decided to expand operations to the UK and accordingly on 1 January 2021,
Camlann UK Ltd, a wholly owned subsidiary, was incorporated in the UK. It
commenced trading immediately, providing desktop valuations to UK insurance
companies. These valuations are wholly performed by staff that are physically located
in Badon. The staff are all employed by Camlann Group SA; a charge is made by
Camlann Group SA to Camlann UK Ltd for the use of staff. Camlann UK Ltd uses a
third party registered office facility in London and any post is scanned in and emailed to
staff that are physically located in Badon.
The two directors of Camlann UK Ltd are tax resident in Badon and perform all their
duties from Badon without visiting the UK.
In order to identify new potential customers in the UK, the company is considering
appointing a UK resident director. This new director will start on 1 January 2022 and
will work from home. Their role will be to discuss the company’s offerings with new
potential customers and maintain relations with current customers, including
entertaining. They will dial into board meetings, which will be held online, by video
conferencing. Sales will not be concluded or substantially concluded in the UK and all
invoicing will continue to be carried out by the Badon staff on behalf of Camlann UK
Ltd.
Camlann UK Ltd has opened one multi-currency bank account in Badon, denominated
in both US dollars and Euros.
Under domestic legislation, a company is tax resident in Badon if it is either
incorporated there or its place of effective management is there. The OECD model tax
convention applies between Badon and the UK.
Requirement:
Explain whether or not Camlann UK Ltd is subject to UK Corporation Tax for the
year ended 31 December 2021 and whether this will change if the new director is
appointed on 1 January 2022. (10)
Page 2 of 11
AT TOMC
,2. Charlese plc is a large animal food manufacturer. Its only subsidiary, Francis Ltd, which
is wholly owned, transferred its trade and assets to Charlese plc on 1 July 2020. Both
companies make up their accounts each year to 31 December.
The following information relates to Charlese plc for the year ended 31 December
2020:
1) At 1 January 2020, the main capital allowances pool tax written down value
brought forward was £1,070,000.
2) The depreciation charge for the year was £4 million.
3) The company’s depreciation policy is as follows:
Land No depreciation
Buildings 2% straight line on buildings
All other assets 20% straight line with a full year’s charge in the year of
acquisition
4) Extract from the tangible fixed assets note from the accounts:
Land and Fixtures, Motor Plant and Total
buildings fittings and vehicles machinery
equipment
Note 1 Note 2 Note 3 Note 4
£ £ £ £ £
Cost – additions 2,233,333 800,000 3,100,000 6,250,000 12,383,333
Cost – - - - 250,000 250,000
disposals
Depreciation – - - - 150,000 150,000
disposals
Note 1
New warehouse: £
Building 1,333,333
Land 500,000
Electrical and water system 250,000
Air conditioning system 100,000
Lift 50,000
Total 2,233,333
Charlese plc entered into a contract with a third party to build the new warehouse on
1 January 2020. The payment was made on 25 March 2020 and the building was
brought into use on 1 April 2020.
Note 2
£
Computer equipment 500,000
Qualifying land remediation expenditure 50,000
Decorating offices 100,000
Moveable partition walls in office* 50,000
Erecting new walls in office 50,000
Painting of new walls in office 10,000
Fire alarm system 20,000
Fire doors 10,000
Portable air conditioning units 10,000
Total 800,000
Continued
Page 3 of 11
AT TOMC
, 2. Continuation
*There are no plans to move the partition walls in the foreseeable future.
Note 3
£
Commercial vehicles under hire purchase agreements 1,000,000
Commercial vehicles under finance leases 2,000,000
Cars with emissions 115g/km 100,000
Total 3,100,000
This is the first year that Charlese plc has acquired assets under finance lease or hire
purchase. The company prepares accounts in accordance with FRS 102.
Note 4
£
Manufacturing equipment 5,000,000
Plant transferred from Francis Ltd 1,000,000
Qualifying research & development expenditure 250,000
Total 6,250,000
The plant transferred from Francis Ltd had a tax written down
value of £1.5 million on 1 January 2020.
Proceeds from the disposal of an item of machinery 275,000
Requirement:
Calculate, with explanations, the capital allowances that may be claimed and the
adjustments that are required to arrive at taxable profits in the Corporation Tax
computation for the year ended 31 December 2020 for Charlese plc.
(20)
Page 4 of 11
AT TOMC
ADVANCED TECHNICAL
Taxation of Major Corporates
May 2021
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.
• 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.
,1. Camlann Group SA has been a provider of desktop property valuations for insurance
companies for many years. The company was incorporated within Badon, a small EU
country and is tax resident there.
It was decided to expand operations to the UK and accordingly on 1 January 2021,
Camlann UK Ltd, a wholly owned subsidiary, was incorporated in the UK. It
commenced trading immediately, providing desktop valuations to UK insurance
companies. These valuations are wholly performed by staff that are physically located
in Badon. The staff are all employed by Camlann Group SA; a charge is made by
Camlann Group SA to Camlann UK Ltd for the use of staff. Camlann UK Ltd uses a
third party registered office facility in London and any post is scanned in and emailed to
staff that are physically located in Badon.
The two directors of Camlann UK Ltd are tax resident in Badon and perform all their
duties from Badon without visiting the UK.
In order to identify new potential customers in the UK, the company is considering
appointing a UK resident director. This new director will start on 1 January 2022 and
will work from home. Their role will be to discuss the company’s offerings with new
potential customers and maintain relations with current customers, including
entertaining. They will dial into board meetings, which will be held online, by video
conferencing. Sales will not be concluded or substantially concluded in the UK and all
invoicing will continue to be carried out by the Badon staff on behalf of Camlann UK
Ltd.
Camlann UK Ltd has opened one multi-currency bank account in Badon, denominated
in both US dollars and Euros.
Under domestic legislation, a company is tax resident in Badon if it is either
incorporated there or its place of effective management is there. The OECD model tax
convention applies between Badon and the UK.
Requirement:
Explain whether or not Camlann UK Ltd is subject to UK Corporation Tax for the
year ended 31 December 2021 and whether this will change if the new director is
appointed on 1 January 2022. (10)
Page 2 of 11
AT TOMC
,2. Charlese plc is a large animal food manufacturer. Its only subsidiary, Francis Ltd, which
is wholly owned, transferred its trade and assets to Charlese plc on 1 July 2020. Both
companies make up their accounts each year to 31 December.
The following information relates to Charlese plc for the year ended 31 December
2020:
1) At 1 January 2020, the main capital allowances pool tax written down value
brought forward was £1,070,000.
2) The depreciation charge for the year was £4 million.
3) The company’s depreciation policy is as follows:
Land No depreciation
Buildings 2% straight line on buildings
All other assets 20% straight line with a full year’s charge in the year of
acquisition
4) Extract from the tangible fixed assets note from the accounts:
Land and Fixtures, Motor Plant and Total
buildings fittings and vehicles machinery
equipment
Note 1 Note 2 Note 3 Note 4
£ £ £ £ £
Cost – additions 2,233,333 800,000 3,100,000 6,250,000 12,383,333
Cost – - - - 250,000 250,000
disposals
Depreciation – - - - 150,000 150,000
disposals
Note 1
New warehouse: £
Building 1,333,333
Land 500,000
Electrical and water system 250,000
Air conditioning system 100,000
Lift 50,000
Total 2,233,333
Charlese plc entered into a contract with a third party to build the new warehouse on
1 January 2020. The payment was made on 25 March 2020 and the building was
brought into use on 1 April 2020.
Note 2
£
Computer equipment 500,000
Qualifying land remediation expenditure 50,000
Decorating offices 100,000
Moveable partition walls in office* 50,000
Erecting new walls in office 50,000
Painting of new walls in office 10,000
Fire alarm system 20,000
Fire doors 10,000
Portable air conditioning units 10,000
Total 800,000
Continued
Page 3 of 11
AT TOMC
, 2. Continuation
*There are no plans to move the partition walls in the foreseeable future.
Note 3
£
Commercial vehicles under hire purchase agreements 1,000,000
Commercial vehicles under finance leases 2,000,000
Cars with emissions 115g/km 100,000
Total 3,100,000
This is the first year that Charlese plc has acquired assets under finance lease or hire
purchase. The company prepares accounts in accordance with FRS 102.
Note 4
£
Manufacturing equipment 5,000,000
Plant transferred from Francis Ltd 1,000,000
Qualifying research & development expenditure 250,000
Total 6,250,000
The plant transferred from Francis Ltd had a tax written down
value of £1.5 million on 1 January 2020.
Proceeds from the disposal of an item of machinery 275,000
Requirement:
Calculate, with explanations, the capital allowances that may be claimed and the
adjustments that are required to arrive at taxable profits in the Corporation Tax
computation for the year ended 31 December 2020 for Charlese plc.
(20)
Page 4 of 11
AT TOMC
