Subject: Taxation Case study Mia Tuiti and her husband Hemi Tuiti are a couple who run a successful business - Tuiti Bee Products Limited ("TBPL"). They plan to expand TBPL'S market and have engaged you to provide them with tax advice regarding their business plan. TBPL was established 6 years ago. It is registered for GST. The company sells Manuka honey in both New Zealand and overseas markets. The business performed very well in the last couple of years. Currently it has retained earnings of $620,000 Mia and Hemi are the shareholders and directors of the company. Each of them holds 50% shares of the company. They are paid director fees from the company's earnings. TBPL is running an apiary at Northland. The farm at which the apiary is located is owned by a family trust. The settlers of the trust are Mia's parents. Mia and her brother are the beneficiaries. TBPL pays rent to the family trust for the use of the farm. Most of the trust's income is distributed to Mia and her brother who pay tax on their beneficiary income. Mia's father is an engineer that has been working and living in the United Kingdom during the last 15 years. As Mia's father will retire soon, her parents are planning to come back to New Zealand in the next few months. Mia was very young when the family trust was settled. She is now a mother of three children. Her children's ages are Mania 15. Anary 17 and Kiri 19. All the children are attending secondary or tertiary schools. They do not have any income. Mia's parents have mentioned several times that they wish to add Mia's children as beneficiaries of the family trust. TBPL currently collect raw honey from its apiary and also purchase raw honey from other apiarists. The raw honey is then sent to a factory to be purified, labeled and packed. TBPL then sell the products on the market. Some Asian customers repeatedly enquired if TBPL sells other bee products, such as bee venom, royal jelly or propolis. Currently TBPL sells these bi- products at a very cheap price. Mia and Hemi are keen to establish their own factory and expand the products range. They have found an ideal factory located at Whangarei. The vendor would like to sell the land and the business together. Mia and Hemi have some difficulty to raise sufficient fund to buy the factory. They are considering selling some shares to Hemi's friend Daniel Tamati and his wife Mina Tamati. The Tamatis. are developers who are looking for a good business to invest the profit they earned from their property development Daniel and Mina would like to acquire 50% of TBPL's shares. Mia and Hemi have some concerns whether involving Tamatis into their business will create any adverse tax impact. Mia told you that TBPL is currently negotiating with a sales agent on the Japanese market. The sales agent would like to order some skincare products with bee venom as the key ingredient. The parties have agreed that TBPL and the Japanese sales agent will develop the products together. The first batch of the products will be delivered by 22 December 2020. A non-refundable deposit of $20,000 will be paid to TBPL upon the signing of the contract. 40% of the sales price will be charged when TBPL completed the laboratory tests and obtained the certificate from the New Zealand authority. The Japanese sales agent will be responsible for acquiring all the certificate required to enter into the Japanese market. The final payment will be charged when the products are delivered Mia also told you that she and Hemi have a rental property located in Auckland. As most of their funds have been invested into TBPL, they had to incur a large mortgage when the property was purchased. However, they are not too worried about it as the loss from the rental property was used to offset against their other income. Mia would like to confirm with you whether they will have any problem with this arrangement. Required: To provide your opinion on the following tax issues: . 4 marks You are required to provide recommendations for all the tax issues and analyse any risk of being treated as a tax avoidance arrangement, for the recommendations you provided. Subject: Taxation Case study Mia Tuiti and her husband Hemi Tuiti are a couple who run a successful business - Tuiti Bee Products Limited ("TBPL"). They plan to expand TBPL'S market and have engaged you to provide them with tax advice regarding their business plan. TBPL was established 6 years ago. It is registered for GST. The company sells Manuka honey in both New Zealand and overseas markets. The business performed very well in the last couple of years. Currently it has retained earnings of $620,000 Mia and Hemi are the shareholders and directors of the company. Each of them holds 50% shares of the company. They are paid director fees from the company's earnings. TBPL is running an apiary at Northland. The farm at which the apiary is located is owned by a family trust. The settlers of the trust are Mia's parents. Mia and her brother are the beneficiaries. TBPL pays rent to the family trust for the use of the farm. Most of the trust's income is distributed to Mia and her brother who pay tax on their beneficiary income. Mia's father is an engineer that has been working and living in the United Kingdom during the last 15 years. As Mia's father will retire soon, her parents are planning to come back to New Zealand in the next few months. Mia was very young when the family trust was settled. She is now a mother of three children. Her children's ages are Mania 15. Anary 17 and Kiri 19. All the children are attending secondary or tertiary schools. They do not have any income. Mia's parents have mentioned several times that they wish to add Mia's children as beneficiaries of the family trust. TBPL currently collect raw honey from its apiary and also purchase raw honey from other apiarists. The raw honey is then sent to a factory to be purified, labeled and packed. TBPL then sell the products on the market. Some Asian customers repeatedly enquired if TBPL sells other bee products, such as bee venom, royal jelly or propolis. Currently TBPL sells these bi- products at a very cheap price. Mia and Hemi are keen to establish their own factory and expand the products range. They have found an ideal factory located at Whangarei. The vendor would like to sell the land and the business together. Mia and Hemi have some difficulty to raise sufficient fund to buy the factory. They are considering selling some shares to Hemi's friend Daniel Tamati and his wife Mina Tamati. The Tamatis. are developers who are looking for a good business to invest the profit they earned from their property development Daniel and Mina would like to acquire 50% of TBPL's shares. Mia and Hemi have some concerns whether involving Tamatis into their business will create any adverse tax impact. Mia told you that TBPL is currently negotiating with a sales agent on the Japanese market. The sales agent would like to order some skincare products with bee venom as the key ingredient. The parties have agreed that TBPL and the Japanese sales agent will develop the products together. The first batch of the products will be delivered by 22 December 2020. A non-refundable deposit of $20,000 will be paid to TBPL upon the signing of the contract. 40% of the sales price will be charged when TBPL completed the laboratory tests and obtained the certificate from the New Zealand authority. The Japanese sales agent will be responsible for acquiring all the certificate required to enter into the Japanese market. The final payment will be charged when the products are delivered Mia also told you that she and Hemi have a rental property located in Auckland. As most of their funds have been invested into TBPL, they had to incur a large mortgage when the property was purchased. However, they are not too worried about it as the loss from the rental property was used to offset against their other income. Mia would like to confirm with you whether they will have any problem with this arrangement. Required: To provide your opinion on the following tax issues: . 4 marks You are required to provide recommendations for all the tax issues and analyse any risk of being treated as a tax avoidance arrangement, for the recommendations you provided