You are a tax manager at Lad & Co Chartered Certified Accountants and you have been asked

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Question:

You are a tax manager at Lad & Co Chartered Certified Accountants and you have been asked by the Senior Partner to provide a report that deals with the issues raised by several tax assistants. In additions to any relevant calculations please provide a clear explanation of how each matter should be treated for tax purposes. There are 10 matters (5 marks per matter) raised by the assistants as follows:

1) On 1 January 2022 Adam sold a business asset to his son, Bernard for 12,000. At the time the market value of the asset was 22,000. Adam had purchased the asset in July 2008 for 4,000. In 2022/23 Bernard permanently ceased to be resident in the UK. At the time he left the UK the asset had a market value of 25,000. What chargeable gain (assuming a joint claim for gift holdover relief has been made) becomes chargeable on Bernard in 2022/23?

2) Mr Flint transferred his business to a quoted company on 1 August of the current tax year realising a gain of 46,000. The consideration comprised cash of 16,000 and shares with nominal value of 50,000 and market value of 60,000. What is the base cost of the new shares for Mr Flint?

3) Rachel is aged 85 and in poor health. She is keen to minimise the inheritance tax due on her death estate which is likely to have a value of about 1.2 million. Her will currently leaves her main residence (valued at 300,000) to her brother and the residue of her estate to her son. Rachel has never been married. She needs advice on whether she should leave her main residence to her son rather than her brother in her will.

4) In August 2008 Jeremy bought a warehouse for 120,000 which he then let out. He sold it for 175,800 in July 2022. Jeremy had taxable income of 60,000 in 2022/23, and has made no other capital disposals in the year. What is the capital gains tax payable on the sale?

5) Chloe owned a field which she purchased on 13 August 1992 for 8,000. On 10 September of the current tax year, she sold a quarter of the field for development for 30,000. The remainder of the field was then worth 10,000. What is Chloe's gain on the sale?

6) Benjamin died on 30 November 2022 leaving an estate valued at 890,000. Inheritance tax of 276,000 was paid in respect of the estate. Under the terms of the will, Benjamin left 260,000 to his wife, a specific legacy of 120,000 (free of tax) to his brother, and the residue of the estate to his grandchildren. What is the amount of inheritance received by Benjamin's grandchildren?

7) Sandeep made a gift of 425,000 to a trust on 10 November 2022. No agreement has been made about who will pay the inheritance tax (IHT) in respect of this gift. What is the due date for payment of the IHT and who is primarily liable for its payment?

8) Joel and Sunita were a married couple. Sunita died in July 2008 and 65% of her nil rate band of 312,000 (2008/09) was used. Joel died in May 2022. He had made a potentially exempt transfer (after all available exemptions) of 75,000 in August 2018. Joel left his estate to his sister. Any relevant elections were made. What was the nil rate band available to set against Joel's death estate?

9) Kirstin gave shares worth 150,000 to a trust on 15 September 2013 and shares worth 600,000 to her brother on 10 July 2019. The nil rate band in 2013/14 and 2019/20 was 325,000. Kirstin died on 23 October 2022. Ignoring the annual exemption, what is the inheritance tax payable on Kirsten's death in relation to her lifetime transfers?

10) Susanna died on 19 November 2022. Her estate consisted of her main residence worth 300,000 (0n which there was secured a repayment mortgage of 195,000) and investments and cash totalling 385,000. Susanna left her estate equally to her son and daughter. She was divorced from her husband. Susanna had not made any lifetime transfers of value. How much inheritance tax will payable on Susanna's estate?