BL Flashcards
1
Q
UNANIMOUS VOTE
REQUIRED
A
UNANIMOUS VOTE
REQUIRED
* Admitting new partner
* Changing nature of partnership business
* Amending partnership agreement
* Expulsion of partner (unless partnership agreement provides otherwise)
2
Q
DUTY TO OTHER PARTNERS
A
DUTY TO OTHER PARTNERS
* Must render true accounts and provide full information
* Must account for profits made by using partnership’s property or name
* Must refrain from competing with partnership
3
Q
DISSOLUTION OF PARTNERSHIP
A
DISSOLUTION OF PARTNERSHIP
* Partnership for specific term or undertaking: dissolves on expiration of term or completion of undertaking
* Partnership at will: dissolved by any partner giving notice to others
Any partner’s death or bankruptcy - automatic dissolution
Court has power to dissolve partnership
4
Q
EFFECT OF DISSOLUTION
A
EFFECT OF DISSOLUTION
Business continues and partners can still bind partnership
* Partners must wind up business and pay off debts
* Distribution of leftover money
- Repay partners ‘loans, then
- Repay partners’ capital,
then
- Distribute in accordance with agreement (or equally if no agreement)
5
Q
INCORPORATION
DOCUMENTs
A
INCORPORATION
DOCUMENTs
* Name of LLP
* Country and address of registered office
* Name and address of each member (at least two
* Identities of designated members
* Details of people with significant control
- More than 25% of assets or voting rights, or other right to control
6
Q
MEMBERS
A
MEMBERS
* At least two
- Less than two for more than six months: person who carried on business liable with
LLP for debts
* Free to leave
* Adding member requires unanimous consent
7
Q
Please note:
A
Please note: The facts I just gave you rarely happen in real life, but they can, and examiners sometimes like testing on such unusual events. So, watch out for situations such as:
one of two partners in an LLP leaves and the other scrambles to find a new partner, but it takes eight months.
For the two months beyond the first six that the partner was the sole member of the LLP, the partner is liable for all LLP debts incurred during that time.
(Press play to continue the video)
7
Q
RIGHTS OF MEMBERS
A
RIGHTS OF MEMBERS
* Share of profits (equal by default
* Indemnification
* Inspect books and records
* Management
8
Q
DUTIES
A
DUTIES
Refrain from competing with
LLP
Refrain from profiting off LLP’s name or property
* Account to LLP
9
Q
LIABILITY OF MEMBERS
A
LIABILITY OF MEMBERS
*
*
No liability for LLP’s debts, or for wrongful acts or omissions of fellow members
Only liable for amount of capital contribution
Still subject to rules for wrongful and fraudulent trading
10
Q
What is the difference in liability between a member of an LLP and a partner of a partnership for obligations of the firm?
A
A member of an LLP has limited liability, meaning they are not personally liable for the LLP’s debts beyond their investment, unless there’s wrongdoing. In contrast, a partner in a traditional partnership has unlimited liability, making them personally responsible for all the partnership’s obligations and debts. This key difference affects the financial risk exposure of individuals involved in LLPs versus traditional partnerships.
11
Q
Let’s review before moving on to the next topic. Which of the following are required to form an LLP?
(check all that apply)
Two or more persons carrying on a business with a view to profit
* A partnership agreement
Filing an incorporation document with the
Registrar of Companies
A
There must be two or more persons carrying on a business with a view to profit, and an incorporation document must be filed with the Registrar of Companies. Most LLPs will have a partnership agreement, but this is not actually required.
12
Q
How does formation of an LLP differ from formation of a general partnership and how are they alike?
A
The formation of an LLP requires filing documents with the Registrar of Companies, giving it a separate legal identity, similar to a general partnership where individuals agree to conduct business together for profit, but without the need for formal registration.
13
Q
Can you remember any other form of business media that requires filing at Companies House?
A
Limited companies also require filing at Companies House, as they need to submit incorporation documents, annual accounts, and other statutory filings to maintain compliance with legal requirements.
Both limited partnerships and limited liability partnerships (LLPs) must be registered with the Registrar of Companies at Companies House before beginning trading.
14
Q
MEMORANDUM OF ASSOCIATION
A
MEMORANDUM OF ASSOCIATION
Document authenticated/signed by persons wishing to become members
15
Q
APPLICATION FOR REGISTRATION
A
APPLICATION FOR REGISTRATION
Standard form
Must include:
* Name of proposed company
* Locationof registered office
* Business details
* Share capital statement
* Initial shareholding
Directors
* Officers (company secretary)
* Persons with significant control
16
Q
What do you call people who are seeking to form a company?
A
Promoters
17
Q
What is the term used for a pre-incorporated company that has already been set up by solicitors that a promoter can simply purchase and take over as a quick way to start a company?
A
The term used for a pre-incorporated company set up for quick purchase and takeover by a promoter is a “shelf company” or “ready-made company.”
18
Q
If the promoter does not want to purchase a shelf company but instead wishes to file all the documentation themselves, where do they file?
A
If a promoter wishes to file the documentation themselves to start a company, they would file the necessary documents with the Companies House, which is the official registrar of companies in the United Kingdom.
19
Q
In your own words, what does it mean for a provision in the articles to be ‘entrenched’? How is this different from other provisions? Why does this matter?
A
An entrenched provision in the articles of association is a clause that is more difficult to amend or remove than other provisions, often requiring a higher level of agreement among the company’s members, such as a supermajority vote. This differs from standard provisions, which can typically be altered by a special resolution (usually a 75% majority). Entrenchment matters because it provides extra protection for specific provisions, ensuring that key aspects of the company’s governance or operations are not easily changed and thereby safeguarding certain interests or principles deemed crucial by the founders or stakeholders.
An entrenched provision in a company’s articles requires a greater consensus for amendment than standard provisions, offering added protection to specific governance aspects.
20
Q
Michael is the sole shareholder and director and the only employee in a company, Michael Ltd, which delivers sandwiches to city workers at their desks.
He owns 100 £1 shares, all fully paid.
Following the coronavirus lockdown, the company went into liquidation owing £35,000 to its creditors.How much would Michael have to pay to the creditors here?
A
As the sole shareholder of Michael Ltd with 100 £1 shares all fully paid, Michael would not be required to pay any additional amount to the creditors beyond his initial £100 investment, due to the limited liability protection offered by the company structure.
21
Q
Charles resigned as a director from his family company, as his wife wanted him to move to Spain to enjoy retirement with her, after many years working long hours. Every Sunday night, he has a long Zoom call with his son and daughter, the current directors, when he sets out his vision for the company and discusses the business for the following week, telling his children what steps to take.
His children listen dutifully to his advice, and agree fully with their father on Sunday evening, but do not always follow his advice.
Is Charles a shadow director and subject to the duties of a director?
A
no
21
Q
Identify each type of director in the table below:
A - De Jure Director
B - De Facto Director
C - Shadow Director
1. A person who acts as a director, claims to be a director, but has never been appointed as a director.
2. A person who acts as a director, claims to be a director, and has been appointed as a director.
3. A person who influences other directors, but does not claim to be a director, and has not been appointed as a director.
A
- B - De Facto Director
- A - De Jure Director
- C - Shadow Director
22
Q
Who do you think the directors owe these duties to?
A
Directors owe their duties primarily to the company itself, acting in the best interests of the company as a whole. This includes considering the interests of shareholders, employees, and potentially other stakeholders, depending on the specific circumstances and jurisdiction.
23
DUTY TO PROMOTE
SUCCESS OF COmPANY
DUTY TO PROMOTE
SUCCESS OF COmPANY
* Act in good faith to promote company for benefit of its members as a whole
* Not just maximizing profit
today
* Consider:
- Long term consequences
- Interests of employees
- Relationships with suppliers and customers
- Impact on
community/environment
24
Match the following director misdeeds with the letter of the duty that was most likely violated in that scenario. (Each choice is only used once.)
A - Duty to act within powers.
B - Duty to promote the success of the company.
C - Duty to exercise independent judgement.
1. Director votes against a business opportunity for Company because he feels sorry for a competitor that the director suspects needs the opportunity to stay afloat.
2. Director is unsure how to vote on a proposal, so bases his vote solely on the advice that a friend gave him on social media.
3. Director unilaterally decides to purchase an extravagant retirement gift using Company funds for another retiring director.
1. B - Duty to promote the success of the company. (The director's decision was influenced by external factors not related to the company's success.)
2. C - Duty to exercise independent judgement. (The director relied on someone else's opinion rather than making an independent decision.)
3. A - Duty to act within powers. (The director exceeded their authority by making a unilateral financial decision without proper approval.)
25
Match the following director misdeeds with the letter of the duty that was most likely violated in that scenario. (Each choice is only used once.)
A - Duty to act within powers.
B - Duty to exercise reasonable care, skill, and diligence.
C - Duty to avoid conflicts of interest.
1. Director forgets to read financial reports regarding an upcoming vote, so he quickly flips a coin to decide whether to vote to approve the deal.
2. Director starts a side business of his own, purchasing Company's products and re-selling them overseas.
3. To garner favour with a foreign government to obtain a contract, the board of directors authorise payment of a bribe to an official of the foreign government.
1. B - Duty to exercise reasonable care, skill, and diligence. (The director's lack of preparation and careless decision-making method violates this duty.)
2. C - Duty to avoid conflicts of interest. (The director's side business directly conflicts with the company's interests.)
3. A - Duty to act within powers. (Authorizing a bribe likely exceeds the directors' powers and violates company policies and laws.)
26
REMEDIES FOR BREACH OF
DIrEcTOr's DUTY
REMEDIES FOR BREACH OF
DIrEcTOr's DUTY
* Account of profits
Return of company property
* Payment of equitable compensation
* Recission of a contract
* Injunctions
* Common law damages
Removal of director through majority vote
Disqualification of director
27
Michael has recently been appointed as a non-executive director of a company which sells new cars. He has various other business interests, including owning 40% of the shares in a company (Dazzle Cleaners Ltd) which specialises in cleaning large areas of plate glass, mainly for commercial premises. At his first board meeting, one of the items on the agenda is to decide which business will win the contract to clean the glass in the company's car showrooms, Dazzle Cleaners Ltd or a rival business.
Write a sentence or two explaining what action Michael should take.
Michael should declare his interest in Dazzle Cleaners Ltd to the board at the earliest opportunity, preferably before the discussion on the cleaning contract begins, and he should recuse himself from any decision-making or discussions related to awarding the cleaning contract to avoid a conflict of interest.
28
What is the key deciding factor regarding dividends?
* (A) Whether the shareholders want a dividend.
* (B) Whether the directors feel that a dividend would attract more shareholders.
© (C) Whether the company is looking
to expand.
* (D) Whether there are profits available
for the purpose.
D
A company must not make distributions to shareholders except out of profits available for that purpose.
29
Shares
ORDINARY SHARES
Equal rights for voting. dividends, and on dissolution
PREFERRED SHARES
Created with rights superior to ordinary shares
Dividend Preference
* Paid first, before ordinary shares
Cumulative
- Rolls over to next year if not paid
Noncumulative
That year's right disappears at end of year if not paid
30
DERIVATIVE ACTION
PERMISSION PROCESS
DERIVATIVE ACTION
PERMISSION PROCESS
Initial Stage
Court reviews application to determine if:
* Prima facie case for breach of duty
Second Stage
Hearing to determine:
* If shareholder acting in good faith
* If reasonable director would continue claim
Likelihood the wrong would be ratified
31
A company has 4 shareholders:
R holds 5% of the shares
S holds 25% of the shares
T holds 50% of the shares
U holds 20% of the shares
R & T are the only directors
U is unhappy with the direction the company is taking.
Would he be able to bring a derivative action? Why?
U might be able to bring a derivative action if he believes that the directors are acting in a way that harms the company, as derivative actions are brought by shareholders on behalf of the company for wrongs done to the company. However, success depends on the specifics of the case and whether U can demonstrate that the directors' actions are indeed harmful to the company and not just decisions U personally disagrees with. Shareholding size is not a direct factor in the eligibility to bring a derivative action, but it may influence the ability to get support for the action from other shareholders.
32
GENERAL MEETINGS
Directors call general meetings
Shareholders owning at least 5% of the company's paid-in voting capital have the right to require the directors to call a meeting
33
Which of the following do not need to be notified of a general meeting?
* (A) Each shareholder of the company
* (B) Each director of the company
O (C) Companies House
O (D) The personal representative of any deceased
shareholder
C) Companies House need not be notified. Notice must be given to all the shareholders but also the directors, any personal representatives of a deceased shareholder, the trustee in a bankruptcy of an insolvent member, and the company's auditor.
34
NOTICE MUST CONTAIN:
NOTICE MUST CONTAIN:
* Company name
* Date, time, and place of meeting
General nature of business to be considered
* Text of any special resolutions
* Proxy statement
35
If a notice is to be sent by email on 1 January, what is the earliest date the meeting can be held?
ChatGPT
If a notice is to be sent by email, it's typically considered delivered on the same day it's sent, assuming no evidence to the contrary. The minimum notice period for general meetings for private companies is 14 clear days unless the company's articles require a longer period or all members entitled to attend and vote agree to a shorter notice period. For public companies, the minimum notice period is 21 clear days for an annual general meeting (AGM) and 14 clear days for other meetings, unless a longer period is specified in the company's articles.
So, if the notice is sent on 1 January, the earliest the meeting can be held for a private company is 16 January, and for a public company's non-AGM, it's also 16 January, but for a public company's AGM, it would be 23 January, assuming no weekend or public holiday affects these dates.
18 January - the notice date plus 17. Notice sent on 1 January is deemed received on 3 January. So, start counting the 14 days on 4 January. 14 days from 4 January is 17 January, so the next clear day is 18 January.
36
A company has 10 members and has adopted the model articles. How many members must be present to have a quorum at a general meeting?
* (A) Six members, as that is a majority.
O (B) Five members, as at least half must be
present.
O (C) Two members, as that is what is provided by statute unless modified.
O (D) One member, so long as all members
received notice.
(C) is correct. You probably didn't miss this (because you just heard the rule), but I wanted to reinforce the rule and show you that examiners can easily make wrong answer choices seem reasonable. This is something you simply must memorise - good reasoning will not do!
37
ORDINARY RESOLUTION OR
SPECIAL RESOLUTION
ORDINARY RESOLUTION OR
SPECIAL RESOLUTION
Ordinary resolution passed:
Over 50% vote in favour
Special resolution passed: Over
75% vote in favour
38
A company has 10 members and has adopted the model articles without change. At a general meeting at which six members are present, the board seeks approval from the shareholders to purchase a new office building. What is the minimum number of votes needed to approve the matter?
O (A) 2
O (B)3
O (C)4
O (D5
O (E) 6
(C) 4 is correct. This is an ordinary resolution because it is not among the list of special resolution issues I just noted. Therefore, approval requires the majority of those present at the meeting. There are six members present, so approval requires four votes (as three would not be a majority).
39
A has 40% of the shares.
B has 40% of the shares.
C has 20% of the shares.
Who would be able to pass ordinary resolutions? Who would be able to pass special resolutions?
Ordinary resolutions require a simple majority (more than 50%) of votes cast by shareholders present and voting at a general meeting. In this scenario, A and B, each holding 40% of the shares, could individually or collectively pass ordinary resolutions, as their combined shareholding exceeds the simple majority threshold.
Special resolutions, on the other hand, require a 75% majority of votes cast. None of A, B, or C individually could pass a special resolution since none holds a 75% share. Even A and B together, with a combined shareholding of 80%, could pass special resolutions, while C alone or any other combination without both A and B would not meet the 75% requirement.
40
In your own words, what is the difference between equity finance and debt finance?
Equity finance involves raising capital through the sale of shares in the company, giving investors ownership interests, while debt finance involves borrowing money that must be repaid, typically with interest, without giving away any ownership.
Remember, equity finance is the company raising capital by selling its shares; debt finance is the company borrowing money to raise capital.
41
A company's articles provide that each share of the company shall have a nominal value of £5. The company sold 100 shares to Steve at a price of £25 per share (a total of £2,500). How much of the sale price will be allocated to the premium account?
* (A) Whatever amount the board deems appropriate.
* (B) All £2,500 because the shares were issued at a premium.
O (c) £2,000 because that
represents the premium received for the shares above nominal
value.
* (D) I don't know, maths is not my strong point.
C
I don't expect that many of you got this wrong. In any case, I just wanted to reinforce the rule. And yes, you may be called upon to do maths on the exam.
42
Which statement is correct?
* (A) A shareholder has a guaranteed income return.
* (B) A shareholder has a guaranteed capital return.
* (c) A fixed charge entered into on
21 August 2020 and registered on 25
August 2020 will take priority over a fixed charge entered on 20 August and registered on 7 September.
* (D) All of the statements are correct.
* (E) All of the statements are incorrect.
E
43
What information can you obtain from Companies House and/or the registered office of a company you are interested in?
From Companies House, you can obtain a wide range of information about a company, including:
1. Company name and registration number.
2. Date of incorporation.
3. Registered office address.
4. Current and resigned officers (directors and secretaries).
5. Document filing history, including annual returns, accounts, and changes in company details.
6. Share capital and shareholder information.
7. Charges and mortgages registered against the company.
8. Insolvency information, if applicable.
9. Confirmation statement and Persons of Significant Control (PSC).
10. Previous company names.
At the registered office of a company, you might be able to request and view certain statutory registers and documents that the company is required to maintain, such as:
1. Register of members (shareholders).
2. Register of directors and secretaries.
3. Register of directors' residential addresses (not publicly accessible).
4. Register of charges.
5. Minutes of general meetings and resolutions.
6. Articles of association and memorandum of association.
Note that some information might only be accessible with proper authorization or under specific circumstances, and companies may charge a fee to provide copies of certain documents.
44
Let's test your understanding of this topic in another scenario:
George runs a pub in London as a sole proprietor. Business recently slowed due to a downturn in tourism, but it is starting to make a comeback. Unfortunately, George owes £20,000 to each of five beer distributors. The debt owed to each creditor is unsecured. If George wants to enter an IVA to lower his monthly payments to avoid bankruptcy, how many of the distributors must agree?
* (A) Three
* (B) Four
* (c) Five
B
George needs agreement from at least half (in number) of the independent creditors. Since there are five creditors, that means he needs at least three. But he also needs creditors holding at least 75% in value of the outstanding unsecured debt. Here the entire debt is £100,000—£20,000 to each of the five beer distributors. The assent of only three distributors would account for only £60,000—60% of the outstanding debt. The assent of four would account for £80,000 or 80%, thus meeting the minimum threshold.
45
Under an IVA, what is the difference between a supervisor and a nominee?
A correct response would indicate that the insolvency practitioner who agrees to propose an IVA to creditors is called a nominee. If the creditors approve the IVA, then the insolvency practitioner oversees implementation of the plan and is now called a supervisor. I don't think you'll be tested on this directly, but you are likely to see these terms in SQE questions, and I don't want you to be confused.
The nominee is an insolvency practitioner proposed by the debtor to help draft the IVA proposal and present it to creditors, playing a key role in the initial stages of setting up the IVA. Once the IVA is approved by the creditors, the nominee typically becomes the supervisor, whose role is to oversee the implementation of the IVA, ensuring the debtor adheres to the terms, collects payments from the debtor, and distributes them to creditors according to the agreement.
46
Anne owns a small pub as a sole proprietor. She owes a beer distributor £3,000, a web designer £1,000, and a food supplier £2,000. Anne has been unable to pay her debts to all three creditors for several months. Which creditors would have to join to petition Anne into bankruptcy?
The beer distributor and the food supplier. We need creditors who are owed at least £5,000 in unsecured debt. We would not have enough debt if the web designer joined with just one other unsecured creditor.
For a creditor to petition for bankruptcy against a debtor in the UK, the debt owed must be at least £5,000. In Anne's case, no single creditor is owed £5,000 or more. However, creditors can join together to meet the £5,000 threshold required for a bankruptcy petition. Therefore, any combination of Anne's creditors whose total claims meet or exceed £5,000 would have to join to petition her into bankruptcy. This could be the beer distributor (£3,000) and the food supplier (£2,000), as their combined debts total £5,000, meeting the threshold.
47
The Savage family business has three partners: Tracy, her husband, and her daughter. Tracy and her husband each contributed £5,000 capital. Tracy's daughter has been made bankrupt and owes £50,000. After the assets of the Savage family business are sold and creditors paid, there is £100,000 left. How much of that do you think will go to the trustee in her daughter's bankruptcy case? Why?
The trustee in the daughter's bankruptcy case would likely receive her share of the partnership's remaining £100,000, which would be £33,333.33, assuming equal partnership shares, to contribute towards her debts.
48
Donald owes tens of thousands of pounds from failed property ventures. He invested heavily in hotels and golf courses which have not been successful. The properties are all mortgaged and the banks are seeking to repossess them to recover the loans. Donald has no other sources of income.
Which of the options we've just discussed would be most appropriate for Donald to get relief from his creditors? Why?
Bankruptcy would be the most appropriate option for Donald to get relief from his creditors, given his significant debts, lack of income, and the banks' actions to repossess mortgaged properties.
49
Refresh your memory:
Before we begin, in a previous module, I mentioned something important that changes when a company is insolvent or on the brink of insolvency. Can you recall what that was?
(Hint: it was in the module discussing a director's duties)
When a company is insolvent or on the brink of insolvency, the directors' duties shift from focusing on the best interests of the shareholders to prioritizing the interests of the creditors to minimize their potential losses.
If you remembered that the director's duties have changed, you are correct. If a company is insolvent or on the brink of becoming insolvent, the directors must consider or act for the benefit of the creditors, displacing their duty to the shareholders.
50
True or False: Fixed asset receivership is not an insolvency proceeding, but usually leads to insolvency.
* True
* False
True. You probably didn't get this wrong (don't worry if you did - you only just heard this for the first time a moment ago). In any case, I just wanted you to think about it a little more. A receiver takes an asset in which the creditor has a security interest after the debtor has defaulted in payment. Since these are usually assets that are important to the business, and without which the business cannot usually operate, fixed asset receivership usually leads to bankruptcy.
51
True or False: A receiver acts for the benefit of the company as a whole and an administrator acts for the benefit of a particular creditor.
O True
O False
False. Just getting you used to the terminology. This is backwards. An administrator (not a receiver) acts for the benefit of the company as a whole (or for its creditors), whereas a receiver acts for an individual creditor by taking and selling a particular asset for a particular creditor.
52
Which of the following are true of a voluntary liquidation?
(check all that apply)
(A) It is a form of bankruptcy.
* (B) The shareholders must pass a resolution approving of the dissolution within five weeks of the directors making a statutory declaration beginning the liquidation.
* (C) An administrator will be appointed to administer the liquidation.
B
53
A company is in compulsory liquidation and all classes of creditors have been paid apart from the unsecured creditors.
There is £15,000 available.
A is owed £5,000.
B is owed £10,000.
C is owed £3,000.
D is owed £2,000.
How much will each creditor receive?
A is owed £5,000: (£5,000 / £20,000) * £15,000 = £3,750
B is owed £10,000: (£10,000 / £20,000) * £15,000 = £7,500
C is owed £3,000: (£3,000 / £20,000) * £15,000 = £2,250
D is owed £2,000: (£2,000 / £20,000) * £15,000 = £1,500
54
Even Bigger Bank Ltd has lent £5 million to A Company Ltd which is now in liquidation. The loan was secured on the company's headquarters which have been sold for £4.5 million. The liquidator confirms that unsecured creditors will receive 2p in the £. How much will Even Bigger Bank receive?
Even Bigger Bank Ltd, as a secured creditor, will first apply the proceeds from the sale of the security (the company's headquarters) towards its debt. The headquarters were sold for £4.5 million.
The bank will receive £4.5 million from the sale of the secured asset.
This leaves a shortfall of £0.5 million (£5 million loan - £4.5 million from the sale).
As an unsecured creditor for the remaining £0.5 million (the shortfall), the bank will participate in the distribution to unsecured creditors, which is 2p in the £ (or 2%).
Therefore, for the £0.5 million unsecured portion:
£0.5 million * 2% = £10,000
In total, Even Bigger Bank Ltd will receive £4.5 million from the secured asset sale plus £10,000 as an unsecured creditor, summing up to £4.51 million.
55
My egg supplier refuses to supply more eggs unless I grant him a charge over my kitchen equipment. Would this be a preference?
O Probably yes
O Probably no
No
56
Eighteen months ago, my baking business sold a property to an unconnected third party for £30,000 less than its market value.
As a result, the company's assets were less than its liabilities.
Would this be a transaction at an undervalue?
O Yes
O NO
No
57
My accountant tells me my company no longer seems financially viable. If I resign, can I avoid liability for wrongful trading?
O Yes
O NO
No
58
COMPANY WILL BE DEEMED UNABLE TO PAY ITS DEBTS IF IT IS PROVED:
COMPANY WILL BE DEEMED UNABLE TO PAY ITS DEBTS IF IT IS PROVED:
* Creditor owed more than £750
served a statutory demand not paid within 21 days
* Creditor has obtained a judgment and attempted to execute it but the debt is not fully satisfied
* Company is unable to pay debts as they fall due (the cash flow test)
* Value of assets are less than liabilities (the balance sheet test)
59
PAY As YoU EARN (PAYE)
PAY As YoU EARN (PAYE)
Employer retains tax from employees making more than
£184 per week
* Submit Full Payment Submission
(FPS) on or before each payday
Money retained must be received by HMRC at least monthly - by the 22nd (along with FPS)
60
1. What is the threshold salary at which an employer must deduct and submit to HMRC employee income tax?
* (A) More than £174
* (B) More than £184
* (C) More than $194
(B) More than £184
61
Generally, what is the latest date by which employee income tax withheld by an employer must be submitted to HMRC?
© (A) The 1st of every month
O (B) The 17th of every month
O (C) The 22nd of every month
* (D) The last day of every month
c
62
REGISTRATION
REGISTRATION
*Within three months of opening
WHEN ARE
SELF-AsSESSMEnT RETUrns
DUE?
Electronic Returns: 31 January
after tax year end
* Paper Returns: 31 October
after tax year end
63
WHEN ARE TAXES DUE?
WHEN ARE TAXES DUE?
* First instalment - 31 January
* Second instalment - 31 July
* Balancing instalment -
31 January
64
Just to ensure you understand. Let’s say your lolly business opened on 1 June 2020. When did the tax year in which you opened your business end? in one sentence
The tax year in which your lolly business opened on 1 June 2020 ended on 5 April 2021.
65
Same facts (business opened 1 June 2020). By what date should you have paid your first tax instalment?
Your first tax installment should have been paid by 31 January 2022.
66
Same facts (business opened 1 June 2020). By what date should you have paid your balancing payment (if one is needed)?
The balancing payment, if needed, should have been paid by 31 January 2022, along with the first installment.
67
CATEGORIES OF TAXABLE INCOME
CATEGORIES OF TAXABLE INCOME
Non-savings income:
employment income, pensions, trading income from running one's own business and property income
* Savings income: interests from bank deposits and corporate and government bonds
* Dividend income: money paid to shareholders of a company
68
CALCULATINg BUSINESS
PROFIT
CALCULATINg BUSINESS
PROFIT
Gross revenue - (revenue expenses + AlA + writing down allowance)
69
REVENUE EXPEnses
REVENUE EXPEnses
Typically recurring such as:
* Salaries of employees
* Rent
* Advertising
* Cost of goods/services sold
69
When are self-assessment tax returns due?
O (A 5 April
O (B) 31 July
O (C) 31 October
* (D) 31 January
O (E) It depends
E
70
If a balancing payment is owed by a business after it pays its first two tax instalments, when is the balancing payment due?
O (A) 5 April
O (B) 31 July
O (0131October
O (D) 31 January
O (E) It depends
D 31 January after the 5 April tax year end.
71
In addition to his wages, Matthew has received income from the following sources during the tax year:
* £200 dividends from shares held in an Individual Savings Account ('ISA')
* £250 tips from customers
* £75 dividends from shares held in XYZ pc
* £100 interest received on a loan to his cousin
* £175 prize from an investment in Premium Bonds
Which of Alex's additional sources of income are exempt from income tax?
(A) The tips and the dividends from XYZ plc only.
O (B) The tips and the dividends from the ISA only.
* (C) The dividends from the ISA and the dividends from XYZ plc only.
* (D) The dividends from the ISA and the income from the Premium Bonds only.
* (E) The tips and the income from the Premium Bonds only.
D. Income derived from an ISA and prizes from Premium Bonds are exempt from tax. The other two sources of income (dividends from a company and tips) are taxable income.
72
ANNUAL INVESTMEnT
ALLOWANCE
ANNUAL INVESTMEnT
ALLOWANCE
* Full deduction of cost
For plant and machinery
* Up to annual investment amount
*Not cars, land, or buildings
72
WRITING DOWN ALLOWANCES
WRITING DOWN ALLOWANCES
An allowance of a set percentage of capital asset acquisition costs each year
73
WRITING DOWN POOLS
WRITING DOWN POOLS
Main pool - 18% per annum
* Special pool - 6% per annum
74
Whitney is a sole trader and has incurred the following expenses:
* £1,000 for her car which she uses 70% for business
* £6,000 for electricity and gas used by the business
* £750 for legal fees for the acquisition of the business premises
* £2,000 for the acquisition of a laptop to be used within the business
What amount can be deducted when calculating Whitney's trading profit?
* (A) $7,450
O (B) £8,700
O (C) £8,750
O (D) £9,450
* (E) £9,750
To calculate the deductible amount for Whitney's trading profit, we consider each expense:
1. Car usage (70% for business): £1,000 * 70% = £700
2. Electricity and gas used by the business: £6,000 (fully business-related, thus fully deductible)
3. Legal fees for the acquisition of business premises: These are capital expenses and not deductible against trading profits.
4. Acquisition of a laptop used within the business: £2,000 (assuming it's fully for business use, it's deductible)
Adding the deductible expenses:
£700 (car) + £6,000 (utilities) + £2,000 (laptop) = £8,700
So, the correct option is:
O (B) £8,700
Only the business proportion of revenue expenses are allowable, so only 70% of the motor vehicle expenses can be deducted. The electricity and gas expenses are wholly related to the business and are, therefore, deductible in full. The cost of the laptop is a one-off capital expense which would come within the annual investment allowance and so it, too, can be deducted in full. The legal fees for the acquisition of the premises are a capital expense which cannot be deducted when calculating income tax; however, these could be deductible when working out the capital gains when the business premises are sold – see capital gains tax.
(£1,000 x 70%) + £6,000 + £2,000 = £8,700
75
A partnership has 3 partners. Their agreement is silent as to allocation of profit. The partnership makes a chargeable profit of £90,000 in its first year of operation.
The partners agree to retain £45,000 of the profit in the business.
How much of the £90.000 profit will be allocated to each partner for income tax purposes?
* (A) £90,000
O (B) £30,000
B
76
INCOME TAX FORMULA
INCOME TAX FORMULA
Gross income
- qualifying loan interest
net income
net income - allowances and
other reliefs = taxable income
77
If you are told the personal allowance is £12,570, at what income level will the personal allowance disappear?
when income reaches £125,140 (£12,570 * 2 + £100,000).
78
MARRIAGE ALLOWANCE
REQUIREMEnts
MARRIAGE ALLOWANCE
REQUIREMEnts
* Married or in a civil partnership
* Transferor's income less than personal allowance
* Recipient a basic rate taxpayer
79
A married couple wishes to use the marriage allowance when calculating their tax burden. One of the spouses is a higher income taxpayer. The other spouse is a basic rate taxpayer who has used £7,000 of the £12,570 personal allowance available in the relevant tax year. The marriage allowance for the relevant tax year is £1,260.
Can the couple take advantage of the marriage allowance?
* (A) Yes, because the lower income spouse is a basic rate taxpayer who did not use all of their personal allowance.
* (B) Yes, but only a credit equal to 20% of the £1,260 is transferred.
O (C) No, because the recipient spouse is a higher income taxpayer.
* (D) No, because the basic income taxpayer used more than half of their personal allowance.
Remember, there are 3 prerequisites to using the marriage allowance: The taxpayer must actually be married, the transferor spouse’s income must be less than the personal allowance, and the recipient spouse must be a basic rate taxpayer. The facts here indicate that the recipient spouse is a higher rate taxpayer. I'm sure some of you were distracted by the financial figures. Don't let that happen on the exam.
(A) is incorrect because it focuses only on the 2 requirements that were met (spouses and one did not use all of their personal allowance), ignoring the fact that the third requirement (recipient is a basic rate taxpayer) was not met.
(B) is incorrect because it, too, ignores the fact that a requirement is not met (although it does correctly state what would happen if the marriage allowance were applicable.
(D) is incorrect because there is no such rule.
80
The owner of a bakery purchased a revolving refrigerated display case to show off delicate cakes and cookies. The cost of the case was £10,000. That was the owner's only capital expense for the relevant tax year. The annual investment allowance for that year was £200,000.
How much of the £10,000 spent on the case may the owner take as an allowance?
* (A) £200,000
* (B) $10,000
* (C) £190,000
O (D) SO
B.
A business owner can take the full cost of most newly purchased capital assets as an allowance each year up to the annual limit (here, £200,000). Since the display case cost £10,000 and that was the owner’s only capital purchase, that is all the allowance that can be taken.
81
Same facts as in the previous question (annual investment allowance = £200,000 and only capital purchase was £10,000).
How much of the unused annual investment allowance can be carried forward to be used in future tax years?
O (A) £200,000
* (B) £10,000
O (C) £190,000
O (D) £0
D.
Any unused annual investment allowance can’t be carried forward into future tax years; it is simply lost.
82
Same facts as in question 2 (annual investment allowance = £200,000 and purchase of a £10,000 display case). The baker also buys a car for £25,000 to be used wholly and exclusively in the business.
How much of the cost of the car can be taken under the annual allowance?
* (A) The whole £25,000 because the car was to be used wholly and exclusively in the business and the owner had otherwise used only £10,000 of the available £200,000 allowance.
* (B) 18% of the £25,000 because the car was to be used wholly and exclusively in the business and the owner had otherwise used only £10,000 of the available £200,000 allowance.
* (C) SO because the annual investment allowance is not available for cars.
C
Remember that the annual investment allowance is not applicable to the purchase of a car. However, that doesn’t mean that there is no allowance for the car. Since the car is being used wholly and exclusively for business, the whole £25,000 can be placed in the main pool and a writing down allowance of 18% of the items in the main pool can be taken annually. So if you chose (B), you were effectively correct, but the deduction against income comes from the writing down allowance and not from the annual investment allowance.
83
TAX RATES (2021/22)
TAX RATES (2021/22)
* Basic rate band: 20%
Higher rate band: 40%
Additional rate band: 45%
84
PERSONAL SAVINgS
ALLOWANCE
PERSONAL SAVINgS
ALLOWANCE
* Basic Rate Taxpayer -
PSA of £1,000
* Higher Rate Taxpayer -
PSA of £500
* Additional Rate Taxpayer -
No PSA
85
A taxpayer had £37,000 of non-savings income and £3,000 of dividend income in a tax year in which the basic rate extends up to £37,700.
How much of the £3,000 pounds of dividends will be taxed at the higher rate?
* (A) None
O (B) £300
O (C) £1,000
O (D) £1,300
(C) £1,000
86
Do not remember!
DIVIDEND TAX RaTES
Dividends within taxpayer's basic rate band: 7.5%
Dividends within taxpayer's higher rate band: 32.5%
* Dividends within taxpayer's additional rate band: 38.1%
87
If a partnership agreement is silent, or there is no partnership agreement, how do partners share losses?
Equally
88
OPTIONS FOR OFFSETTINg
TRADE LOSSES
OPTIONS FOR OFFSETTINg
TRADE LOSSES
* Set loss against taxpayer's net income from current or prior tax year
* All or nothing claim
* Can offset remaining loss against capital gains in same year
*Carry forward against future trading profits
Use to offset company dividends or salary upon incorporation
Use to offset final year gains or back up to three
89
A taxpayer who owned a store which ceased trading last year was unable to use £3,000 of his trading loss. He was unable to find work in the current tax year, but his wife has a business of her own. She had a £30,000 trading gain in the current tax year. The man's son was employed the current year and had non-savings income of £22,000.
What can the man do with the unused trading loss in the current tax year?
O (A) Nothing
* (B) Transfer it to his wife only.
O (C) Transfer it to his son only.
O (D) Transfer it to either his wife or his son.
A
Only the taxpayer who made the loss can claim loss relief.
90
A taxpayer has a homebased business and works as a bartender. In the current tax year, the taxpayer's home-based business had a trading loss of £10,000, but the taxpayer made £20,000 tending bar. The relevant personal allowance is £12,570. The taxpayer had taxable income of £32,000 in the prior tax year.
Which of the following best reflects an option the taxpayer has relevant to current year loss relief?
O (A) Set £10,000 of the loss against the £20,000 income, use £10,000 of the applicable personal allowance to reduce his taxable
income to £0, and carry forward the remaining £2,570 of unused personal allowance into the next year.
O (B) Set £10,000 of the loss against the £20,000 income, use £10,000 of the applicable personal allowance to reduce his taxable
income to £0, and do nothing with the remaining £2,570 of unused personal allowance.
* (C) Set off the £12,570 personal allowance against the £20,000 income, use £7,430 of the loss to reduce his income to £0, and carry the remaining loss back a year.
B
Trade losses may be set off against a taxpayer’s total income in the current year and/or carried back into a prior year, but this must be done before personal allowances are applied. So the taxpayer would use up the entire loss in the current tax year and then would use their personal allowance to reduce their taxable income to £0. The unused part of the personal allowance can’t be carried forward or back; it is lost.
(A) is incorrect because the unused part of the personal allowance can’t be carried forward or back; it’s lost.
(C) is incorrect because the trade loss must be applied to income before applying the personal allowance.
91
3. True or false? Assume a taxpayer has £60,000 taxable non-savings income after applying all available allowances. £60,000 falls within the higher rate tax band (40%). Therefore, the taxpayer's tax burden is £24,000.
* (A) True.
O (B) False.
False.
Income falling within a tax band is taxed at the band’s rate; all of the taxpayer’s income is not taxed at the highest band rate. So, for example, if the basic band rate (20%) applied to income up to £37,700 in the relevant tax year, the taxpayer would be liable for £7,540 tax for income in the basic rate band plus £8,920 for the part of their income (£22,300) within the 40% higher rate band (a total of £16,460).
92
Assume in the relevant tax year, a basic rate taxpayer is entitled to a personal savings allowance of £1,000 and a higher rate taxpayer is entitled to a personal savings allowance of £500. A taxpayer's non-savings income in the relevant tax year was £37,400. The taxpayer also had £600 in savings income that year. The basic rate band applied to income up to £37,700.
How much is the taxpayer's personal savings allowance?
O (A) £1,000
O (B) £500
O (C) SO
B) is correct. The personal savings allowance is actually a nil rate band and not a deduction. So we treat the income as being there and the amount equal to the personal savings allowance is taxed at nil. Taxpayer’s income was £38,000 including their savings income. That puts the taxpayer into the higher rate band. Therefore, they get a £500 personal savings allowance.
93
EFFECT OF RESIDEnCE
EFFECT OF RESIDEnCE
* Residents chargeable regardless of location of asset
* Non-residents not chargeable regardless of location of asset
Exception: Non-residents are chargeable to tax if they dispose of interest in land situated in the
UK
94
If I sold my Sinclair C5 electric tricycle on 15 December 2020 for a £9,601 gain, when was CGT due?
31 January 2022
95
!
Disposal proceeds - Costs of acquisition =
Capital gain or loss
96
DEEMED OCCUPATIOn
DEEMED OCCUPATIOn
* Last 9 months of ownership
* Absence for any reason (up to three years)
97
An owner lives in their house in London for 4 years, is transferred to work in Manchester for 5 years, and then returns to their home for one year and sells it.
For purposes of CT, what's their period of occupation?
* (A) 5 years
* (B) 10 years
O (C) 9 years
B
98
Ruby has made the following disposals during the tax year 2019/20:
* Sale of gilt purchased for £8,000 and sold for £14,500.
* Sale of a racehorse purchased for £13,000 and sold for £18,000.
* Gift of an antique table purchased for £6,000 and sold for £10,500.
* Sale of a vintage car purchased for £3,000 and sold for £16,000.
* Sale of land to her daughter puchased for £15,000 and sold for £50,000 when its market value was £100,000
Select the correct total chargeable gain.
O (A) £39,500
О (B) £98,500
* (C) £89,500
* (D) £93,500
* (E) $111,500
(C) is correct. The racehorse (a wasting chattel), the gilt (government bond), and the car are exempt assets; therefore, no gain arises.
The land was sold to a connected party (daughter) and therefore market value is used to calculate the gain: £100,000 - £15,000 = £85,000. The antique table is a non-wasting chattel but as proceeds are more than £6,000, a normal gain arises: £10,500 - £6,000 = £4,500.
Total gains: £85,000 + £4,500 = £89,500.
99
REQUIREMENTS FOR
BUSINESS AsSET DISPOSAL
RELIEF
REQUIREMENTS FOR
BUSINESS AsSET DISPOSAL
RELIEF
Business asset owned for at least 2 years; and
* Trading business
* Shares in trading company; or
Assets owned/used by personal trading company
100
I started a yo-yo manufacturing business 3 years ago as a sole trader. My yo-yos are quite popular because I put the faces of politicians on the outer surfaces of the yo-yos. A large, multinational company has offered to buy my business for £1,700,000, and I accept, realising a gain of £1,200,000.
Can I properly apply for Business Asset Disposal Relief?
* (A) No, because the transaction did not involve any specific business asset.
* (B) No, because my business was a sole proprietorship.
* (C) No, because of Business Asset Disposal Relief taper.
O (D) Yes.
(A) is incorrect because the sale of all or part of a trading business carried on by a sole trader or partnership CAN qualify for Business Asset Disposal Relief. That makes (B) incorrect as well. (C) is incorrect because there is no taper (if there were, I would have told you about it).
101
HOLD OVER RELIEF
HOLD OVER RELIEF
Assets used in trade/profession
Shares in unquoted trading company
*Shares in transferor's company
* Assets qualifying for agricultural property relief
102
REPLACEmEnT OF
BUSINESS AsSET RELIEF
REPLACEmEnT OF
BUSINESS AsSET RELIEF
* Businessowner who sells building
* Then buys replacement premises
* Can roll sale profit into new premises
And reduce acquisition cost of new premises by gain realised
103
So, let's say, 5 years after incorporating, I sell all of my shares to a large toy company for £380,000, Remember, I paid £200,000 for the yo-yo business assets, they were worth £450,000 when I transferred them to the yo-yo company, and I claimed incorporation relief.
Which of the following statements is correct regarding the sale of my shares to the large toy company?
* (A) I made a £70,000 loss.
* (B) I made a £180,000 gain.
B
I made a £180,000 gain because, when I claimed incorporation relief, I reduced the acquisition cost of my shares by the gain I had in the yo-yo business when I exchanged the business assets for my shares. So the acquisition cost of my shares was £200,000. I sold the shares for £380,000. We subtract the acquisition cost from that to arrive at a £180,000 gain.
104
EIS RELIEF
EIS RELIEF
*
Encourages investment in small companies
By allowing CT deference on gain made by investing that gain in small company
105
CGT RATE VARIABLES
* Individual's taxable income
Disposed asset's nature
106
I'm a higher rate taxpayer. I've used all of my basic rate band and I have capital gains of £10,000. How much will I owe in capital gains tax if my capital gains tax rate is 20% and none of the reliefs we discussed before apply?
£0
107
I have made a £30,000 taxable gain and no relief is available. How much tax do I owe on this gain?
30000 - 12300 = 17700 * 20% =3540
108
If I have a £15,000 loss on the sale of my yo-yo and a £25,000 gain on the sale of some shares, and I'm a higher rate taxpayer, what will my capital gains tax be?
O (A) $2,800
О (B) £2.000
O C) SO
My capital gains tax will be £0, because £10,000 is less than the annual exempt amount. Sorry for being tricky here. If my gain was £10,000 after applying my annual exempt amount, the answer would be (B), because the gain would be taxed at 20%. 28% (A) is used only for gains on residential property.
109
CAPITAL LOSS TIMING RULES
CAPITAL LOSS TIMING RULES
* Must be set off against any same year gain
* Excess losses are carried forward to offset future gains
110
On 1 January 2021, Isaac sold a freehold property for £400,000 that he had acquired for £180,000. In the previous year, on 1 June 2020, Isaac bought a freehold property for £360,000. Both properties were used for trading purposes. Isaac is a higher rate taxpayer.
What is Isaac's capital gain tax liability for tax year 2020/21?
O (A) £2,770
O (B) £8,000
O (C) £4,000
* (E) £5,540
E
Due to a qualifying business asset being purchased within the requisite time period (1 January 2020 to 31 December 2024), replacement of business asset relief is available. As the sale proceeds have not been fully reinvested, some of the gain cannot be deferred (£400,000 − £360,000 = £40,000). After deducting the annual exemption (£40,000 − £12,300 = £27,700), CGT will be payable at 20% as Isaac is a HRTP. Entrepreneur's relief is not available on the disposal of an asset in isolation.
The gain that can be deferred, £180,000 (£220,000 − £40,000), will be deducted from the cost of the replacement asset going forward.
111
CORPORATION TAX FORMULA
CORPORATION TAX FORMULA
Trade profit
+ Other income
+ Chargeable gains
- Charitable deductions
Taxable income x 19% = tax
112
Sunshine Ltd, which is not a large company, has a corporation tax liability of £75,000 for the year ended 31
March 2020.
When is the corporation tax due for the year ended 31 March 2020?
* (A) 31 January 2021
* (B) 1 January 2021
O (C) 31 March 2021
* (D) 31 March 2020
O E) 31 December 2020
B) is correct. Companies which are not large pay their corporation tax 9 months and 1 day from the end of the accounting period.
113
What is the company tax rate?
* 40%
0 20%
0 19%
0 15%
19%
114
CHARGEABLE GAINS
CHARGEABLE GAINS
* Companies do not pay capital gains tax
* Capital gains charged as income
* No annual exemption
* Replacement of Business Assets Relief is available
115
Loss RELIEF OPTIOns
Loss RELIEF OPTIOns
* Offset loss against profits (before qualifying charitable deductions) of same accounting period
* Offset loss against total profits (before qualifying charitable deductions) of prior 12 months
* Carry loss forward against future profits
116
ANTI-AVOIDANCE RULES
ANTI-AVOIDANCE RULES
* Income tax due on no or low interest loans
* Tax is on unpaid interest
* Company pays penalty tax of 32.5% on loan
* Due 9 months, 1 day after accounting period end
* Refunded when loan repaid or waived
* If waived, borrower owes tax on amount forgiven
117
A controlling shareholder of a close company causes their company to lend them £50,000 at 1% interest. The official interest rate is 2.5%.
Does the shareholder owe any tax based on these facts?
* (A) No, because the loan is not interest free.
* (B) No, because the tax consequences are to the company only.
(C) Yes, they would have to pay tax on 1.5% of the loan amount per annum.
* (D) Yes, they would have to pay tax on 2.5% of the loan per annum.
C
The shareholder would have to pay tax on 1.5% of the loan amount per annum. The tax owed is on the interest forgone based on the official rate. The facts indicate the official rate is 2.5% and the rate being charged is 1%. The interest forgone is the difference (1.5%).
118
A controlling shareholder of a close company causes their company to lend them £50,000 at 1% interest. The official interest rate is 2.5%.
Does the company owe any tax based on these facts?
O (A) No, because the loan is not interest free.
* (B) No, because the tax consequences are to the shareholder only.
O (C) Yes, the company would have to pay tax on 1.5% of the loan amount per annum
O (D) Yes, the company would have to pay a notional tax equal to 32.5% of the amount of the loan.
D.
The company would have to pay a notional tax equal to 32.5% of the amount of the loan. When a close company makes a loan to a controlling shareholder, the company must pay a notional tax of 32.5% to HMRC, which may be refunded if the borrower repays or to the extent the loan is forgiven. If forgiven, the forgiven amount is treated as a dividend to the borrower.
119
I paid £320 VAT when I purchased supplies to make yo-yos which I sold to a national retail chain for £4,000 plus £800 VAT. That £800 VAT is my output tax, but I don’t have to pay all of that over to HMRC.
You can deduct the £320 VAT paid on supplies (input tax) from the £800 VAT collected from sales (output tax), so you would owe HMRC the difference of £480.
120
REQUIREd VAT REGISTRATION
REQUIREd VAT REGISTRATION
* Historic Test
* Value of taxable supplies in previous 12 months > £85,000
Future Test
* Value of taxable supplies made in next 30 days is likely
> £85,000
121
VAT DEREGISTRATION
VAT DEREGISTRATION
* Required - stops trading
Required - Stops making taxable supplies
* Voluntary - Taxable supplies < £83,000 in 12-month period
122
What is the corporate tax rate?
(A) 15%
O (B) 19%
O (6) 20%
O (D) 32.5%
(B) 19%
122
VAT InvOIces
VAT InvOIces
* Must include
* The supplier's VAT number
* The tax point
* The value of the supply, and
* The rate of tax charged
* Can be used to recover input tax
* Must be issued to ALL customers
123
Other than large companies, when are company taxes due?
* (A) 5 April of the following tax year
* (B) 5 October
* (C) 6 months and a day after the end of its accounting period
© (D) 9 months and a day after the end of its accounting period
D
124
At what rate do companies pay tax on their capital gains?
O (A) 0%
O (B) 15%
O (C) 19%
O (D) 28%
O (E) It depends on their tax bracket.
O (C) 19%
125
Are companies entitled to an annual exemption against capital gains?
* (A) Yes, just like individuals.
* (B) No, they are not given an annual exemption.
(B) No, they are not given an annual exemption.
126
Mariah has been a VAT-registered trader for several years and recently purchased various items for use in her trade:
* A van
* Fixed partitions for use in the office
* A motorcycle for business deliveries
* Entertainment costs for UK clients
* A computer
On which item can Mariah not recover input VAT?
* (A) Van
* (B) Fixed partitions
* (C) Motorcycle
* (D) Client entertaining
O (E) Computer
D
VAT cannot be recovered on business entertaining, cars, and on any private proportion of other expenses.
