Monday 1 June 2009
2 An extract from an e-mail from your manager following a meeting he has had with Charleston Dance is set out below.
I attach a memorandum summarising the matters discussed in a meeting I had yesterday with Charleston. I also
attach a calculation of the inheritance tax due on his father’s death as prepared by his friend, Lindy. I have not had
the chance to look at this in detail but I can confirm that the annual exemptions and the taper relief have been
applied correctly and that there are no arithmetical errors; please review it with care.
I want you to write a letter from me to Charleston covering the following issues.
(i) Inheritance tax
– Brief explanations of any errors you find when you review Lindy’s calculation of the inheritance tax due
on Charleston’s father’s death and the effect of correcting the errors on the total inheritance tax due.
(ii) Investments and pensions
– The suitability of investing in venture capital trusts and a summary of the tax reliefs available in respect
of such an investment.
– The maximum tax allowable pension contributions that can be made by Charleston and Betty and the
effect on this, if any, of purchasing further rental properties.
(iii) Income tax planning
– Calculations, with supporting explanations to show that the total tax payable would increase (rather than
decrease!) if he were to transfer all of the quoted shares and government stocks to a company wholly
owned by him. Use the income figures from Lindy’s inheritance tax calculation for these purposes and
assume that the whole of the new company’s post-tax income would be paid as a dividend to Charleston.
– The income tax advantages of Charleston transferring investments to Betty or their children.
– The points that Charleston needs to be aware of in connection with tax avoidance schemes and the
taxation of the Balboan properties.