THE CHARTERED INSTITUTE OF TAXATION
APPLICATION AND PROFESSIONAL SKILLS
Taxation of Owner-Managed Businesses
November 2021
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.
• 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.
,You are a tax manager in AC Accounts LLP, a firm of Chartered Accountants.
Your client, Hack Marketing Ltd, is a successful family company producing marketing and promotional
material. Paul Links, your tax partner, has received an email from Phoebe Tanner (EXHIBIT A), who is
a director of the company. Phoebe said that they have received an offer for the company from Market
International Ltd and she has asked for advice on how to proceed. Paul has asked you to prepare a draft
letter to Phoebe for his review.
The following exhibits are provided to assist you:
EXHIBIT A: Email from Phoebe Tanner
EXHIBIT B: Letter from Market International Ltd to Phoebe Tanner
EXHIBIT C: Email from Adul Franks to Paul Links
EXHIBIT D: Pre-seen information
Requirement:
Write a draft letter to Phoebe Tanner advising her on how best to proceed in relation to the offer
from Market International Ltd.
Continued
Page 2 of 8 APS OMB
,Continuation
EXHIBIT A
Email from Phoebe Tanner
From:
To:
Date: 30 October 2021
Subject: Possible sale of Hack Marketing Ltd
Hi Paul
As you know, with mum looking to retire and my brother Phil no longer involved in the business, we have
been considering a sale of the company for some time. I have received the attached letter (EXHIBIT B)
from Market International Ltd and as you can see, they have made a preliminary offer to buy Hack
Marketing Ltd.
Rather surprisingly they have indicated that they wish to purchase the trade and assets rather than the
shares of the company. The principal reason appears to be that they don’t want La Mabelle, the Swiss
ski chalet the company purchased in 2006. As the family used to visit the chalet for skiing holidays I’m
very attached to it and would like to hold on to it, perhaps by extracting it from the company before sale.
Whilst a sale of the company would be an excellent retirement opportunity for my mother, I will almost
certainly need to continue working. Dean Marks and I have been investigating the possibility of forming
a new company in the sports marketing sector if Hack Marketing Ltd is sold. This is not a sector that
Market International Ltd operate in and they have indicated that they would not object provided we had
satisfied the 12 month employment lock-in mentioned in their letter.
We have a shareholders’ meeting next Wednesday (my brother will join by video conference) and I should
be grateful if you could advise us on how best to proceed in order to maximise the funds available to each
of the shareholders on a sale.
I look forward to hearing from you
Regards
Phoebe Tanner
Director, Hack Marketing Ltd
Continued
Page 3 of 8 APS OMB
, Continuation
EXHIBIT B
Letter from Market International Ltd to Phoebe Tanner
Ms Phoebe Tanner Pablo Hortez
Hack Marketing Ltd Market International Ltd
West Lane Apple Business Park
Big Town London
BL9 5LL WH1 2LE
21 October 2021
Dear Phoebe
Thank you for providing the company’s financial information following our meeting in July. I have just
returned from the US and have received authority to make an offer for the following trade and assets of
Hack Marketing Ltd.
Purchase price
£
Goodwill 1,200,000
11-13 Rose Road 625,000
Stock 324,000
Fixtures and fitting and plant and machinery 25,000
Total purchase price payable on completion £2,174,000
In addition we wish to purchase Hack House from Mrs Mary Hack at a price of £565,000.
A condition of purchase would be that the senior management team, with the exception of Mary Hack,
remain in employment with the company for at least 12 months post completion.
I appreciate that we had originally discussed a share purchase but this will not be possible whilst the
company holds the investment property, La Mabelle. If you are able to extract this property from the
company then we would consider a share purchase. The consideration payable on a share purchase will
reflect the above asset values together with any adjustments to reflect any other assets or liabilities of the
company as at the date of completion.
Could you please discuss this with your fellow shareholders and advise whether the above preliminary
offer is acceptable and how you would prefer to structure the sale? If you are in agreement we will instruct
our legal team to prepare formal heads of terms.
If you have any questions please do not hesitate to contact me.
Yours sincerely
Pablo Hortez
CFO Market International Ltd
Continued
Page 4 of 8 APS OMB
APPLICATION AND PROFESSIONAL SKILLS
Taxation of Owner-Managed Businesses
November 2021
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.
• 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.
,You are a tax manager in AC Accounts LLP, a firm of Chartered Accountants.
Your client, Hack Marketing Ltd, is a successful family company producing marketing and promotional
material. Paul Links, your tax partner, has received an email from Phoebe Tanner (EXHIBIT A), who is
a director of the company. Phoebe said that they have received an offer for the company from Market
International Ltd and she has asked for advice on how to proceed. Paul has asked you to prepare a draft
letter to Phoebe for his review.
The following exhibits are provided to assist you:
EXHIBIT A: Email from Phoebe Tanner
EXHIBIT B: Letter from Market International Ltd to Phoebe Tanner
EXHIBIT C: Email from Adul Franks to Paul Links
EXHIBIT D: Pre-seen information
Requirement:
Write a draft letter to Phoebe Tanner advising her on how best to proceed in relation to the offer
from Market International Ltd.
Continued
Page 2 of 8 APS OMB
,Continuation
EXHIBIT A
Email from Phoebe Tanner
From:
To:
Date: 30 October 2021
Subject: Possible sale of Hack Marketing Ltd
Hi Paul
As you know, with mum looking to retire and my brother Phil no longer involved in the business, we have
been considering a sale of the company for some time. I have received the attached letter (EXHIBIT B)
from Market International Ltd and as you can see, they have made a preliminary offer to buy Hack
Marketing Ltd.
Rather surprisingly they have indicated that they wish to purchase the trade and assets rather than the
shares of the company. The principal reason appears to be that they don’t want La Mabelle, the Swiss
ski chalet the company purchased in 2006. As the family used to visit the chalet for skiing holidays I’m
very attached to it and would like to hold on to it, perhaps by extracting it from the company before sale.
Whilst a sale of the company would be an excellent retirement opportunity for my mother, I will almost
certainly need to continue working. Dean Marks and I have been investigating the possibility of forming
a new company in the sports marketing sector if Hack Marketing Ltd is sold. This is not a sector that
Market International Ltd operate in and they have indicated that they would not object provided we had
satisfied the 12 month employment lock-in mentioned in their letter.
We have a shareholders’ meeting next Wednesday (my brother will join by video conference) and I should
be grateful if you could advise us on how best to proceed in order to maximise the funds available to each
of the shareholders on a sale.
I look forward to hearing from you
Regards
Phoebe Tanner
Director, Hack Marketing Ltd
Continued
Page 3 of 8 APS OMB
, Continuation
EXHIBIT B
Letter from Market International Ltd to Phoebe Tanner
Ms Phoebe Tanner Pablo Hortez
Hack Marketing Ltd Market International Ltd
West Lane Apple Business Park
Big Town London
BL9 5LL WH1 2LE
21 October 2021
Dear Phoebe
Thank you for providing the company’s financial information following our meeting in July. I have just
returned from the US and have received authority to make an offer for the following trade and assets of
Hack Marketing Ltd.
Purchase price
£
Goodwill 1,200,000
11-13 Rose Road 625,000
Stock 324,000
Fixtures and fitting and plant and machinery 25,000
Total purchase price payable on completion £2,174,000
In addition we wish to purchase Hack House from Mrs Mary Hack at a price of £565,000.
A condition of purchase would be that the senior management team, with the exception of Mary Hack,
remain in employment with the company for at least 12 months post completion.
I appreciate that we had originally discussed a share purchase but this will not be possible whilst the
company holds the investment property, La Mabelle. If you are able to extract this property from the
company then we would consider a share purchase. The consideration payable on a share purchase will
reflect the above asset values together with any adjustments to reflect any other assets or liabilities of the
company as at the date of completion.
Could you please discuss this with your fellow shareholders and advise whether the above preliminary
offer is acceptable and how you would prefer to structure the sale? If you are in agreement we will instruct
our legal team to prepare formal heads of terms.
If you have any questions please do not hesitate to contact me.
Yours sincerely
Pablo Hortez
CFO Market International Ltd
Continued
Page 4 of 8 APS OMB
