Question 3

3.1

Longshaw Ltd owns 80% of the shares in Heston Ltd. Both companies are resident in the UK and manufacture and sell garden products.

The following are the results for Longshaw Ltd for the year ended 31 December 2019

		Notes
	Tax adjusted trading profit before interest payable, rent payable and capital allowances	1		1,007,510
	Bank interest receivable			3,610
	Debenture interest receivable	2		16,000
	Profit on the sale of a factory	3		238,765
	Loan interest payable	4		12,480
	Qualifying charity donation			3,000

Notes: The following transactions occurred after the results for Longshaw Ltd were recorded in the accounts presented above.

1. The capital allowances on plant and machinery were 120,780 for the year.

2. The debenture interest was received from Browning Ltd, an unconnected UK resident company.

3. Longshaw Ltd purchased a new factory on 1 March 2006, for 660,560. The factory was sold on 1 November 2019 for 966,660.

From 1 November 2019, Longshaw Ltd leased factory space (under the terms of an operating lease) from Barratt Ltd (an unconnected company) and paid rent of 123,500 pa.

Heston Ltd purchased new offices for use in its trade in April 2019 costing 950,000.

4. The loan interest payable arose on a loan taken out on 1 April 2019 to fund the purchase of shares in Heston Ltd.

Requirement

Calculate the corporation tax payable by Longshaw Ltd for the year ended 31 December 2019. (10 marks)

Note: Assume the retail price index for December 2017 is 278.1 and for November 2019 is 284.4.

3.2

Explain the conditions which must be met in order for companies to be treated as being part of a group for loss relief purposes and for chargeable gain purposes.

(5 marks)

Total [15 marks]

Question 3 .3.1 Longshaw Ltd owns 80% of the shares in Heston Ltd. Both companies are resident in the UK and manufacture and sell garden products. . The following are the results for Longshaw Ltd for the year ended 31 December 2019 Notes 14 1,007,5104 Tax adjusted trading profit before interest payable, rent payable and capital allowances Bank interest receivable Debenture interest receivable Profit on the sale of a factory Loan interest payable Qualifying charity donation 2 34 4 3,610 16,000 238,765 12,480 3,000 e Notes: The following transactions occurred after the results for Longshaw. Ltd were recorded in the accounts presented above. 1 t 2 t 3 The capital allowances on plant and machinery were 120,780 for the year. + The debenture interest was received from Browning Ltd, an unconnected UK resident company Longshaw Ltd purchased a new factory on 1 March 2006, for 660,560. The factory was sold on 1 November 2019 for 966,660. From 1 November 2019, Longshaw Ltd leased factory space (under the terms of an operating lease) from Barratt Ltd (an unconnected company) and paid rent of 123,500 pa. Heston Ltd purchased new offices for use in its trade in April 2019 costing 950,000. e 4 The loan interest payable arose on a loan taken out on 1 April 2019 to fund the purchase of shares in Heston Ltd. Requirement Calculate the corporation tax payable by Longshaw Ltd for the year ended 31 December 2019. (10 marks) Note: Assume the retail price index for December 2017 is 278.1 and for November 2019 is 284.4. e 3.2 Explain the conditions which must be met in order for companies to be treated as being part of a group for loss relief purposes and for chargeable gain purposes. (5 marks) Total [15 marks] Question 3.14 de T. hi Trade profits (W1) Loan relationships (W2)- Chargeable gain (W3) Total profits Less qualifying donations Taxable total profits Corporation tax liability- x 19% 1. T 1. WORKINGS (W1) Trade profits 1. T. 1. (W2) Loan Relationships ce 1.1. (W3) Chargeable gain Question 3 .3.1 Longshaw Ltd owns 80% of the shares in Heston Ltd. Both companies are resident in the UK and manufacture and sell garden products. . The following are the results for Longshaw Ltd for the year ended 31 December 2019 Notes 14 1,007,5104 Tax adjusted trading profit before interest payable, rent payable and capital allowances Bank interest receivable Debenture interest receivable Profit on the sale of a factory Loan interest payable Qualifying charity donation 2 34 4 3,610 16,000 238,765 12,480 3,000 e Notes: The following transactions occurred after the results for Longshaw. Ltd were recorded in the accounts presented above. 1 t 2 t 3 The capital allowances on plant and machinery were 120,780 for the year. + The debenture interest was received from Browning Ltd, an unconnected UK resident company Longshaw Ltd purchased a new factory on 1 March 2006, for 660,560. The factory was sold on 1 November 2019 for 966,660. From 1 November 2019, Longshaw Ltd leased factory space (under the terms of an operating lease) from Barratt Ltd (an unconnected company) and paid rent of 123,500 pa. Heston Ltd purchased new offices for use in its trade in April 2019 costing 950,000. e 4 The loan interest payable arose on a loan taken out on 1 April 2019 to fund the purchase of shares in Heston Ltd. Requirement Calculate the corporation tax payable by Longshaw Ltd for the year ended 31 December 2019. (10 marks) Note: Assume the retail price index for December 2017 is 278.1 and for November 2019 is 284.4. e 3.2 Explain the conditions which must be met in order for companies to be treated as being part of a group for loss relief purposes and for chargeable gain purposes. (5 marks) Total [15 marks] Question 3.14 de T. hi Trade profits (W1) Loan relationships (W2)- Chargeable gain (W3) Total profits Less qualifying donations Taxable total profits Corporation tax liability- x 19% 1. T 1. WORKINGS (W1) Trade profits 1. T. 1. (W2) Loan Relationships ce 1.1. (W3) Chargeable gain