Monday 2 June 2008
(a) Prepare the memorandum requested by your manager. The memorandum should include explanations
together with supporting calculations and should identify any further information that you think is required.
The following marks are available for the four components of the memorandum:
(i) The amount of tax that can be saved via the use of the loss of Dione Ltd; (7 marks)
In early 2009, Tethys Ltd will sell its manufacturing premises for £240,000 and move to a rented factory. The
premises were acquired new on 1 May 1998 for £112,000 and immediately brought into industrial use. The tax
written down value for the purposes of industrial buildings allowances as at 31 December 2008 will be £62,720.
We agreed that the indexation factor on the disposal can be assumed to be 27%.
Information requested by DD
(i) The maximum amount of tax that can be saved via the use of the loss of Dione Ltd assuming it is not carried
forward and the date by which the necessary claims must be submitted.
(ii) The amount of the trading loss of Tethys Ltd for the year ending 31 December 2008 that can be used by
Saturn Ltd and the ability of Tethys Ltd to use this loss in the future.
(iii) In respect of the sale of the manufacturing premises:
– Whether or not Tethys Ltd should charge value added tax (VAT) on the sale of the property.
– The taxable profit arising in respect of the sale.
– The amount of the gain that could be rolled over if Tethys Ltd or any of the other Saturn Ltd group
companies acquired assets costing £200,000, the types of asset that would have to be purchased and
the period during which the assets would need to be acquired.
(iv) Any stamp duty and/or stamp duty land tax payable by the Saturn Ltd group in respect of the proposed
Tax manag e r