FOR EXAM PURPOSES – YOUR ANSWERS SHOULD HAVE THESE SIX ITEMS – TIUREC
1.Template – letter, report, memo
2. Intro -short
3 Use what, why, to whom, how much, when re legislation & APPLY TO SITUATION
4. References – Case law & legislation
5. Easy marks – What additional inform needed; implications on other taxes – VAT, shareholders income tax, stamp duty etc
6. Conclusion including & “subject to anti-avoidance/abusive legislation
1. Buying/Selling shares can be classified as trading
Recent case law – Akhtar Ali vs HMRC (2016) – the courts concluded that the taxpayer satisfied the badges of trade and was indeed trading; not a capital gains tax issue, as he a deliberate and organised scheme of profit making – he had an office, trading for 20 yrs etc hence not just speculating.
2. Management expenses
1. Capital and National Trust ltd vs Golder – definition of “expenses of management” – expense relating to the management of investment business.
2. Sunlife Assurance Society vs Davidson (1958) has established that direct costs of changing investments like brokerages, and stamp duties are NOT allowed (as they are incidental costs of acquiring an investment).Expenditure could not be severed from the costs of acquisition of an investment once a particular target had been identified eg acquisition fees.
3.Camas Plc v Atkinson – Before exclusion of expenses relating to capita nature, the courts would compare “expenses of management” or “acquisition costs of the investment”. It was decided that costs incurred before “date of the decision to acquire the investment” do not form part of acquisition costs hence revenue nature.
3. Deduction of VAT by holding companies – The Larentia and Minerva case
A holding company can recover VAT if it provides taxable economic activities like management services, issuing loans on commercial terms to subsidiaries etc
4. De Beers Consolidated Mines Ltd v Howe (1906) – Where the e majority of directors and directors meetings and important decisions where held in UK yet the company’s mining operations were carried out in South Africa. The courts concluded that the company resides where its real business is carried on ie where the central management and control actually abides.
5. Succession/ Hive-up trade- Leekes case, it may be possible to argue that when C’s trade is transferred to A, the enlarged trade of A is the same as the trade previously carried on by B or C