Your client Rosa has meet your manager. The below are extracts prepared by your manager on basis of meeting with Rosa detailing the work she requires you to do are set out below. Extracts from the memorandum prepared by your manager dated 3 June 2019 Rosa Rosa is 63 years old and has significant personal wealth. She has taxable income of approximately 120,000 each year, much of which she is able to save. She uses her capital gains tax annual exempt amount and her inheritance tax annual exemption every year. She is resident and domiciled in the UK. Rosa has agreed to provide financial assistance to her nephew, Harry. Harry financial position Harry recently left university and, on 6 April 2019, he started working for NL Ltd, an unquoted company. He earns an annual gross salary of 25,200. Since 6 April 2019, NL Ltd has provided Harry with the use of a mobile telephone (market value of 650) and a home cinema system (market value of 1,700). On 1 June 2019, NL Ltd issued 200 1 ordinary shares to Harry. This share issue was not made as part of an approved share scheme. Harry paid 300 for these shares, which had a market value of 2,100 at that time. The shares are not readily convertible assets and Harry is not permitted to sell them until 1 April 2023. Harry currently receives dividend income of 420 each year. He is resident and domiciled in the UK. Harry estimates that from 6 April 2019 he needs 2,500 per month to pay his rent and living expenses. Rosa has asked us to calculate how much cash Harry will need for the tax years 2019/20 and 2020/21, over and above his post-tax income from all sources. Providing financial assistance to Harry alternative strategies Rosa is considering three alternative strategies to provide financial assistance to Harry. (i) Gift of investment property on 1 July 2019 This investment property is currently worth 370,000. Rosa purchased the property for 130,000 on 1 July 2008. Since its acquisition, this property has been rented out for taxable net rental income of 1,100 per month. It is a residential building, but I do not know whether or not it has been rented out as furnished holiday accommodation. Under this strategy, Harry would continue to rent out the property on the same basis from 1 July 2019 onwards. (ii) Gift of shares in Far Ltd on 1 July 2019 These shares are worth 420,000. They represent the whole of Rosas shareholding in the company and constitute 14% of the companys issued ordinary share capital. Rosas father gave the shares to Rosa on 1 November 2018 when they were worth 375,000. That gift resulted in a chargeable gain of 225,000 of which 140,000 was held over via a gift relief claim. Far Ltd is an unquoted trading company. It owns chargeable non-business assets which represent 16% of its total chargeable assets. (iii) Monthly cash gifts commencing on 1 July 2019 Rosa would simply make a cash gift to Harry of 1,000 each month commencing on 1 July 2019 Please prepare a memorandum for the client files consisting of the work set out below. (a) Harry additional cash requirement Calculate the total additional cash required by Harry, over and above his income from all sources, for the tax years 2019/20 and 2020/21, after deducting tax and national insurance contributions (NIC). In order to prepare the calculations efficiently, you should think about how Harrys taxable income in 2020/21 will differ from that in 2019/20. There is no need to provide any narrative explanation of your calculations. (b) Providing financial assistance to Harry alternative strategies In respect of each of the three alternative strategies set out in my memorandum, explain: The increase in Harrys post-tax income for the 21-month period ending 5 April 2021. You should ONLY consider the post-tax income to be received by Harry in relation to strategies (i) and (iii) and NOT strategy (ii). There is no need to consider the capital values of any of the strategies as, in the short term, Harry will not realise any of this value. The capital gains tax liabilities FOR ROSA ONLY on the assumption that those reliefs which are available will be claimed. The inheritance tax implications for Rosa and Harry including consideration of the availability of business property relief. As I noted in my memorandum, I do not know whether the investment property qualifies as furnished holiday accommodation or not. You should explain the liabilities for both possibilities regarding this property. You SHOULD NOT provide a definition of furnished holiday accommodation. Calculate the chargeable capital gain for gift of shares in Far Ltd as per provisions of UK TAX LAWS Finance Act 2019