Bipbop Limited, a successful trading company incorporated and based in the UK, has recently moved to...

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Bipbop Limited, a successful trading company incorporated and based in the UK, has recently moved to larger premises. The current factory was acquired in March 2012 for £700,000 and was sold for £2,100,000 in March 2022. A replacement property was acquired in April 2022 costing £1,900,000. Bipbop Limited is to submit a claim for rollover relief (replacement business asset relief). a) Assuming that rollover relief is claimed, calculate the capital gain after the claim to rollover relief, and the base cost of the new building. Indexation allowance March 2012 to December 2017 0.155 (5 marks) Bipbop Limited has incurred expenditure on a new project that qualifies for SME R&D relief. The tax-adjusted trading profit of Bipbop Limited for the year to 31 March 2022, is £1,650,000 before any R&D relief claim. The company incurred qualifying R&D expenditure as follows: Capital expenditure Revenue expenses £200,000 £600,000 b) Calculate the Corporation tax liability of Bipbop Limited after adjusting the profit for tax relief for the R&D expenditure. The R&D revenue expenses have been deducted when calculating the tax-adjusted profit. (4 marks) Bipbop Limited plans to establish a new 100% subsidiary company overseas. c) Prepare a note to the directors of Bipbop Limited to explain the criteria for determining if this new company is UK tax resident or not and the implications of UK residence to the tax position of Bipbop Limited. (3 marks) Bipbop Limited is VAT registered and is to purchase a new machine from a UK supplier for £500,000 inclusive of VAT. d) Explain the main taxation implications to Bipbop Limited of this transaction. (2 marks) One of the directors, who owns 25% of the ordinary shares in Bipbop Limited, is to borrow £50,000, interest free, from the company on 1 July 2022 with the intention to repay the loan in full after two years. e) with calculations, briefly explain the tax and NIC liabilities that may arise on Bipbop Limited as a result of the loan. (6 marks) Bipbop Limited, a successful trading company incorporated and based in the UK, has recently moved to larger premises. The current factory was acquired in March 2012 for £700,000 and was sold for £2,100,000 in March 2022. A replacement property was acquired in April 2022 costing £1,900,000. Bipbop Limited is to submit a claim for rollover relief (replacement business asset relief). a) Assuming that rollover relief is claimed, calculate the capital gain after the claim to rollover relief, and the base cost of the new building. Indexation allowance March 2012 to December 2017 0.155 (5 marks) Bipbop Limited has incurred expenditure on a new project that qualifies for SME R&D relief. The tax-adjusted trading profit of Bipbop Limited for the year to 31 March 2022, is £1,650,000 before any R&D relief claim. The company incurred qualifying R&D expenditure as follows: Capital expenditure Revenue expenses £200,000 £600,000 b) Calculate the Corporation tax liability of Bipbop Limited after adjusting the profit for tax relief for the R&D expenditure. The R&D revenue expenses have been deducted when calculating the tax-adjusted profit. (4 marks) Bipbop Limited plans to establish a new 100% subsidiary company overseas. c) Prepare a note to the directors of Bipbop Limited to explain the criteria for determining if this new company is UK tax resident or not and the implications of UK residence to the tax position of Bipbop Limited. (3 marks) Bipbop Limited is VAT registered and is to purchase a new machine from a UK supplier for £500,000 inclusive of VAT. d) Explain the main taxation implications to Bipbop Limited of this transaction. (2 marks) One of the directors, who owns 25% of the ordinary shares in Bipbop Limited, is to borrow £50,000, interest free, from the company on 1 July 2022 with the intention to repay the loan in full after two years. e) with calculations, briefly explain the tax and NIC liabilities that may arise on Bipbop Limited as a result of the loan. (6 marks)

Answer rating: 100% (QA)

a Calculation of Capital Gain and Base Cost Original Property Cost March 2012 700000 Sale Proceeds March 2022 2100000 Replacement Property Cost April ... View the full answer