Question 2 (27 marks) Mr Cha is employed as the Marketing Director of Solar Ltd, a Hong Kong incorporated subsidiary of a London based company, Solar Power Holding Ltd. The group's headquarter and key management is based in London. Mr Cha has been working at Solar Ltd for 10 years. Information for the year of assessment 2021/22 are given as follows: (i) Mr Cha received monthly salary of $80,000 and was provided a four-bedroom apartment with Mr Cha paying a monthly nominal rent of $5,000 to Solar Ltd. Mr Cha was also provided a company car for own use and received monthly petrol subsidy of $1,000. In addition, there was a monthly education allowance of $8,000 for Mr Cha's 16 years old daughter who studied in an international school. (ii) On 1 April 2020, Solar Ltd granted share options to all management staff in which Mr Cha was granted 10,000 shares of Solar Ltd at exercise price of $5 per share. The share price at that time was $15 each. Mr Cha exercised the options on 3 January 2022 when the share price was $18 each. (iii) Mr Cha was appointed as director to the board of Solar Power Holding Ltd on 1 September 2021 and he received monthly director fee of $13,000. (iv) Mr Cha contributed $4,000 per month to the mandatory provident fund. In addition, Mr Cha contributed $50,000 to a tax-deductible voluntary contributions (TVC) account operated by an insurance company. He also purchased a qualifying deferred annuity policy (QDAP) and paid annual premium of $100,000. He is the sole policy holder and the sole annuitant of the QDAP policy. (v) Mr Cha purchased several health insurance policies under the voluntary health insurance scheme (VHIS) in which Mr Cha is the policy holder. Details are as follows: Insured person a. Mr Cha b. c. His wife, Mrs Cha Daughter Premiums paid 13,000 12,000 2,000 (vi) Mr Cha owns an apartment which is purchased on mortgage loan at Lantau Island and received monthly rent of $11,000. Quarterly rates of $2,400 was paid by the landlord according to the tenancy agreement. The tenant incurred window repair expense of $2,000 in January 2021 and it was agreed that the amount would not be reimbursed by Mr Cha. Mortgage interest incurred for the property was $140,000 during the year of assessment 2021/22. (vii) Mr Cha's wife is a part-time piano teacher in a music school. For the year of assessment 2021/22, Mrs Cha earned tuition income of $110,000 and she made monthly contribution of $1,200 to the mandatory provident fund. (viii) Mrs Cha runs a consultancy firm (See and Partners) in partnership with two partners, Ms See and Ms Lee. See and Partners has a financial year ending on 31 March. All partners share profits and losses equally. Ms See and Ms Lee draw monthly salaries of $10,000 and $15,000 respectively. The agreed tax losses brought forward from last year are - Ms See: $34,000; and Ms Lee: $26,000. The adjusted profits for the year of assessment 2021/22 is $ 390,000. Ms See and Ms Lee did not elect for personal assessment for the year of assessment 2021/22.