Question 5. Succession and Retirement planning On 30 June 2020, Harry gave 75% of his shareholding in Carbofive Limited, an engineering business, to his daughter Kate. Harry had acquired a 100% shareholding in Carbofive Limited in 1990 for 200,000. Harry has been a director of Carbofive Limited since 1990 and resigned immediately after the gift. Carbofive, Limited has no non-business assets. For capital gains tax purposes a 75% shareholding at the time of the gift was valued at 1,000,000. For Inheritance tax purposes the following valuations are appropriate: 100% shareholding 75% shareholding 25% shareholding 1,500,000 1,000,000 250,000 After the gift, Kate became a full-time working director in the company. Harry is a higher rate income taxpayer and made no other gains during 2020/21. He has never previously made any capital gains or lifetime gifts for Inheritance tax. On 6 April 2021, Harry left the UK to live overseas and became non-UK resident but retained his 25% interest in Carbofive Limited. In January 2022, an unexpected offer was received of 2,000,000 for 100% of the shares in Carbofive, Limited. Harry returned to the UK to help with the sale negotiations and the offer was accepted by Harry and Kate. a) Ignoring a possible claim for gift relief, calculate Harry's potential capital gains tax liability as a result of the gift to Kate, clearly identifying any capital gains tax reliefs included in your calculation. (4 marks) b) Calculate the potential impact on the capital gains tax cost of Kate's shares if she makes a Gift Relief claim with Harry on the gift of shares. (3 marks) c) With calculations, explain how the value of the gift of shares to Kate would be determined for Inheritance tax purposes and how it could come in to charge to Inheritance tax. (4 marks) d) Calculate the capital gains tax liability that will arise for Kate on the sale of her shares in January 2022 assuming that a gift relief election was not made in respect of the gift in June 2020. Kate is a higher rate taxpayer and made no other gains during 2021/22. You should assume that all tax rates remain unchanged for 2021/22. (3 marks) e) Identify, with reasons the maximum number of days that Harry could spend in the UK during 2021/22 without becoming UK resident for the year. (2 marks)