Notes from Exam Practice Questions

Question 1

What is holdover relief and when does a gain crystalise when using holdover relief

Answer 1

Holdover relief is when a gain on sale of an asset is reinvested in a depreciating asset.

The gain crystalises on the earlier of:
- The disposal of the asset;
- The asset ceases to be used in the trade; or
- 10 years following the date of acquisition of the new asset.

Question 2

What should be provided if purchasing a building eligable for SBAs?

Answer 2

A written allowance statement to allow the company to continue claiming SBAs.

Question 3

What can be claimed under s.179ZA TCGA 1992 in reference to de-grouping charge?

Answer 3

If on the date of transfer, a company paid £X under MV on that date and a future de-grouping charge arises.

The de-grouping charge can be reduced by £X amount to avoid double taxation.

Question 4

How are QCBs, treasury stocks and exchanges gains/losses treated?

Answer 4

Under loan relationship rules

If asked about chargeable gains in regard to QCBs state they are out of scope.

Question 5

How are leased car rentals that have emissions greater than 50g/km treated in comp?

Answer 5

Only 85% of rental payments allowable therefore restrict.

Question 6

Explain an “earn-out”?

4 points

Answer 6

An earn out is when a disposal include deferred consideration.

If the earn-out is ascertainable then the additional proceeds are simply added to the main gain.

If the earn-out is unascertainable then we use the Marren vs Ingles principle. We must establish the value of the right to receive consideration and add to the main gain.

When the further consideration is recieved, this is considered a further disposal with the base cost being the amount included in the main gain.

Question 7

What are the 2 options to treat software?

Answer 7

1. IFA Regime;
2. Elect to claim CAs

Question 8

If no DTT is in place what type of tax relief can be given on overseas profits taxed?

Answer 8

Unilateral relief at lower of:
- UK CT
- Overseas tax paid

Question 9

How can unsued DTR be used from Subs and PEs?

Answer 9

Subs - Wasted

PE - Carry back up to 3 years or carry forward

Question 10

What do HMRC consider substantial non-trading activity (SSE purposes)?

Answer 10

Over 20% relates to non-trading.