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英国特许公认会计师考试（ACCA）
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P6高级税务
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3.Nocturne Ltd, a partially exempt company for the purposes of value added tax (VAT), requires advice on the corporation tax implications of providing an asset to one of its shareholders; the income tax implications for another shareholder of making a loan to the company; and simplifying the way in which it accounts for VAT.
Nocturne Ltd:
– Is a UK resident trading company.
– Prepares accounts to 31 March annually and expects to pay corporation tax at the rate of 20%.
– Has four shareholders, each of whom owns 25% of the company’s ordinary share capital.
– Owns a laptop computer, which it purchased in October 2012 for ￡1,200, and which has a current market value of ￡150.
– Has purchased no other plant and machinery for several years and the tax written down value of its main pool at 31 March 2015 was ￡nil.
Provision of a laptop computer to one of Nocturne Ltd’s shareholders:
– Nocturne Ltd is considering two alternative ways of providing a laptop computer in the year ending 31 March 2016 for the personal use of one of its shareholders, Jed.
– Jed is neither a director nor an employee of Nocturne Ltd.
– Option1: Nocturne Ltd will buy a new laptop computer for ￡1,800 and give it immediately to Jed.
– Option 2: Nocturne Ltd will gift its existing laptop to Jed and will purchase a replacement for use in the company for ￡1,800.
Loan from Siglio:
– Siglio will loan ￡60,000 to Nocturne Ltd on 1 October 2015 to facilitate the purchase of new equipment.
– Siglio is both a shareholder of Nocturne Ltd and the company’s managing director.
– Nocturne Ltd will pay interest at a commercial rate on the loan from Siglio.
– Siglio will borrow the full amount of the loan from his bank on normal commercial terms.
VAT – partial exemption:
– Nocturne Ltd is partially exempt for the purposes of VAT.
– Nocturne Ltd’s turnover for the year ended 31 March 2015 was ￡240,000 (VAT exclusive).
– Nocturne Ltd’s turnover for the year as a whole for VAT purposes comprised 86% taxable supplies and 14% exempt supplies.
– The input VAT suffered by Nocturne Ltd on expenditure during the year ended 31 March 2015 was:
简答题
1、
(a) Explain, with the aid of supporting calculations, which of the two proposed methods of providing the laptop computer to Jed would result in the lower after-tax cost for Nocturne Ltd.
Note: You should ignore value added tax (VAT) for part (a) of this question. (7 marks)
简答题
2、
(b) Explain the income tax implications for Siglio of providing the loan to Nocturne Ltd. (4 marks)
简答题
3、
(c) (i) Determine, by reference to the de minimis tests 1 and 2, Nocturne Ltd’s recoverable input VAT for the year ended 31 March 2015. (4 marks)
(ii) Advise Siglio of Nocturne Ltd’s eligibility for the annual test for computing the amount of recoverable input VAT for the year ending 31 March 2016 and the potential benefits to be gained from its use.(5 marks)
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【组合题】3.Nocturne Ltd, a partially exempt company for the purposes of value added tax (VAT), requires advice on the corporation tax implications of providing an asset to one of its shareholders; the income tax implications for another shareholder of making a loan to the company; and simplifying the way in which it accounts for VAT.
Nocturne Ltd:
– Is a UK resident trading company.
– Prepares accounts to 31 March annually and expects to pay corporation tax at the rate of 20%.
– Has four shareholders, each of whom owns 25% of the company’s ordinary share capital.
– Owns a laptop computer, which it purchased in October 2012 for ￡1,200, and which has a current market value of ￡150.
– Has purchased no other plant and machinery for several years and the tax written down value of its main pool at 31 March 2015 was ￡nil.
Provision of a laptop computer to one of Nocturne Ltd’s shareholders:
– Nocturne Ltd is considering two alternative ways of providing a laptop computer in the year ending 31 March 2016 for the personal use of one of its shareholders, Jed.
– Jed is neither a director nor an employee of Nocturne Ltd.
– Option1: Nocturne Ltd will buy a new laptop computer for ￡1,800 and give it immediately to Jed.
– Option 2: Nocturne Ltd will gift its existing laptop to Jed and will purchase a replacement for use in the company for ￡1,800.
Loan from Siglio:
– Siglio will loan ￡60,000 to Nocturne Ltd on 1 October 2015 to facilitate the purchase of new equipment.
– Siglio is both a shareholder of Nocturne Ltd and the company’s managing director.
– Nocturne Ltd will pay interest at a commercial rate on the loan from Siglio.
– Siglio will borrow the full amount of the loan from his bank on normal commercial terms.
VAT – partial exemption:
– Nocturne Ltd is partially exempt for the purposes of VAT.
– Nocturne Ltd’s turnover for the year ended 31 March 2015 was ￡240,000 (VAT exclusive).
– Nocturne Ltd’s turnover for the year as a whole for VAT purposes comprised 86% taxable supplies and 14% exempt supplies.
– The input VAT suffered by Nocturne Ltd on expenditure during the year ended 31 March 2015 was:
564 人做过
【组合题】4.King, a wealthy client of your firm with a significant property portfolio, requires advice on the sale of some unquoted shares and on the capital gains tax and inheritance tax implications of transferring assets to a trust and to his two children.
King:
– Is resident and domiciled in the UK.
– Is an additional rate taxpayer.
– Has used his capital gains tax annual exempt amount for the tax year 2015/16.
– Has made one previous lifetime gift of ￡25,000 to his daughter, Florentyna, on 1 June 2014.
– It should be assumed that King will die on 1 May 2017.
King’s family:
– King’s daughter, Florentyna, is 34 years old and has two young children.
– Florentyna will have income from part-time employment of ￡10,000 in the tax year 2015/16. This is her only source of taxable income.
– King’s son, Axel, is 40 years old and has an 18-year-old daughter, who is a university student.
King’s plans:
– On 1 September 2015, King will sell some of his shares in Wye Ltd.
– On 1 October 2015, King will put a cottage he owns in Newtown and the after-tax cash proceeds from the sale of the shares in Wye Ltd into an interest in possession trust for Florentyna and her children.
– On 1 March 2016, King will gift his share of a flat in Unicity to Axel.
Sale of shares in Wye Ltd:
– Wye Ltd is an unquoted investment company.
– King acquired 5,000 shares in Wye Ltd on 1 June 2002 at a cost of ￡5 each.
– These shares will be worth ￡45 each on 1 September 2015.
– King will sell sufficient shares to generate after-tax proceeds of ￡30,000.
Cottage in Newtown:
– This property is wholly owned by King.
– It is expected to have a value of ￡315,000 on 1 October 2015.
Creation of the interest in possession trust:
– King will pay any inheritance tax arising as a result of the gifts made to the trust.
– Florentyna will be the life tenant and her two young children will be the remaindermen of the trust.
– Florentyna will live in the cottage in Newtown and the trustees will invest the cash in quoted shares which will generate annual dividends of ￡3,000.
Flat in Unicity:
– The flat in Unicity is jointly owned by King and his wife, Joy, in the proportions: King 75% and Joy 25%.
– King and Joy have recently signed a contract with Axel’s daughter to rent the flat to her for three years starting on 1 September 2015.
– The rental agreement is on a commercial basis.
– King has obtained the following expected valuations for the flat as at 1 March 2016
555 人做过
【简答题】
Ernest intends to sell a capital asset on 1 February 2013 and wishes to maximise his after tax sales proceeds He is
also seeking advice on his inheritance tax position and on his will.
The following information has been obtained from a telephone conversation with Ernest and from client files.
Ernest:
- Is 54 years old and unmarried.
- Lives with Georgina, who is 48 years old, and her adult daughter, Eileen.
- Earns a salary of ￡130,000 per year.
- Has as yet made no disposals of capital assets in the tax year 2012/13.
- Intends to sell either an oil painting or 7,700 shares in Neutron Ltd on 1 February 2013
Oil painting:
- Ernest inherited the painting on the death of his uncle on 1 May 2007 when it was worth ￡23,300.
- Ernest's uncle purchased the painting on 1 July 1993 for ￡19,500.
- The painting is expected to be worth ￡47,000 on 1 February 2013.
Shares in Neutron Ltd:
- Qualified for income tax relief under the enterprise investment scheme (EIS) although Ernest did not claim
any relief.
- 1 April 2004 Ernest subscribed for 18,600 shares at ￡8.90 per share.
- 1 March 2006 Ernest received a 1 for 4 bonus issue.
- 1 July 2009 Ernest purchased his full entitlement under a 1 for 10 rights issue at ￡4.20 per share.
- The shares are expected to be worth ￡5 each on 1 February 2013.
Neutron Lid:
- Has an issued share capital of two million ￡1 ordinary shares.
- Is not quoted on any stock exchange.
- Manufactures and distributes radiation measuring equipment.
Inheritance tax planning and wills:
- Neither Ernest nor Georgina have made any lifetime gifts.
- In his will, Ernest has left the whole of his estate to Georgina.
- In her will, Georgina has left the whole of her estate to Eileen.
- Ernest and Georgina wish to minimise their total inheritance tax liability.
- They are willing to make lifetime gifts to each other but not to Eileen or any other person or organisation.
Current market values of assets owned:
Ernest Georgina
￡ ￡
Family home 620,000 -
Antiques and works of art 400,000 60,000
Investment property 380,000 -
Shares in Neutron Ltd 127,875 -
Required
(a) Prepare calculations of the after tax sales proceeds that would be realised on the proposed sale of the
painting and on the proposed sale of the shares on 1 February 2013.
Note: you should assume that Ernest will make any necessary beneficial claims or elections.
(b) Prepare brief notes explaining the inheritance tax liabilities that will arise on the deaths of Ernest and
Georgina if no action is taken to reduce such liabilities; identify any actions that could be taken in order to
reduce these liabilities and explain the inheritance tax and capital gains tax implications of these actions.
Note: you are not required to prepare calculations for part (b) of this question.
Assume that the tax rules and rates for 2011/12 continue to apply in subsequent years.
also seeking advice on his inheritance tax position and on his will.
The following information has been obtained from a telephone conversation with Ernest and from client files.
Ernest:
- Is 54 years old and unmarried.
- Lives with Georgina, who is 48 years old, and her adult daughter, Eileen.
- Earns a salary of ￡130,000 per year.
- Has as yet made no disposals of capital assets in the tax year 2012/13.
- Intends to sell either an oil painting or 7,700 shares in Neutron Ltd on 1 February 2013
Oil painting:
- Ernest inherited the painting on the death of his uncle on 1 May 2007 when it was worth ￡23,300.
- Ernest's uncle purchased the painting on 1 July 1993 for ￡19,500.
- The painting is expected to be worth ￡47,000 on 1 February 2013.
Shares in Neutron Ltd:
- Qualified for income tax relief under the enterprise investment scheme (EIS) although Ernest did not claim
any relief.
- 1 April 2004 Ernest subscribed for 18,600 shares at ￡8.90 per share.
- 1 March 2006 Ernest received a 1 for 4 bonus issue.
- 1 July 2009 Ernest purchased his full entitlement under a 1 for 10 rights issue at ￡4.20 per share.
- The shares are expected to be worth ￡5 each on 1 February 2013.
Neutron Lid:
- Has an issued share capital of two million ￡1 ordinary shares.
- Is not quoted on any stock exchange.
- Manufactures and distributes radiation measuring equipment.
Inheritance tax planning and wills:
- Neither Ernest nor Georgina have made any lifetime gifts.
- In his will, Ernest has left the whole of his estate to Georgina.
- In her will, Georgina has left the whole of her estate to Eileen.
- Ernest and Georgina wish to minimise their total inheritance tax liability.
- They are willing to make lifetime gifts to each other but not to Eileen or any other person or organisation.
Current market values of assets owned:
Ernest Georgina
￡ ￡
Family home 620,000 -
Antiques and works of art 400,000 60,000
Investment property 380,000 -
Shares in Neutron Ltd 127,875 -
Required
(a) Prepare calculations of the after tax sales proceeds that would be realised on the proposed sale of the
painting and on the proposed sale of the shares on 1 February 2013.
Note: you should assume that Ernest will make any necessary beneficial claims or elections.
(b) Prepare brief notes explaining the inheritance tax liabilities that will arise on the deaths of Ernest and
Georgina if no action is taken to reduce such liabilities; identify any actions that could be taken in order to
reduce these liabilities and explain the inheritance tax and capital gains tax implications of these actions.
Note: you are not required to prepare calculations for part (b) of this question.
Assume that the tax rules and rates for 2011/12 continue to apply in subsequent years.
533 人做过
【组合题】
503 人做过
【组合题】Boltzman Machines (Boltzman) is a listed, multinational engineering business. It has two divisions, one manufacturing aerospace parts and the other automotive parts. The company is known for innovation and it allows its managers much autonomy to run their own divisions and projects. There has been recent criticism at a shareholders’ meeting of the executive management for not listening to shareholders’ concerns and allowing this autonomy to run out of control. Therefore, the board at Boltzman have decided to create a framework which brings together all of the initiatives described below.
The chief executive officer (CEO) feels that the performance prism may be a suitable model and has asked you to draft a report to the board to explain the model and how Boltzman’s existing initiatives fit within it.
The initiatives which are running at present are:
1. An analysis of stakeholder influence at Boltzman leading to suitable strategic performance measures.
2. A benchmarking exercise of the performance measures from initiative 1 with Boltzman’s main competitor,General Machines.
3. The introduction of quality initiatives bringing lean production methods to Boltzman.
The CEO also requires your input on each of these initiatives as they are all at various stages of progress:
First, a stakeholder analysis has been completed by one of Boltzman’s managers (in Appendix 1) but she has gone on holiday and has not written up a commentary of her results. Therefore, the CEO wants you to take the information in Appendix 1 and explain the results and evaluate the suggested performance measures. The CEO has asked that you do not, at this stage, suggest long lists of additional indicators.
Second, the CEO wants you to use these suggested measures to benchmark the performance of Boltzman against General Machines. The CEO stated, ‘Make sure that you calculate the measures given in Appendix 1. You should also add two justified measures of your own using the data provided. However, restrict yourself to these seven measures and don’t drown us with detail about individual business units.’ A junior analyst has gathered data to use in the benchmarking exercise in Appendix 2.
Third, the company has stated that one of its strategic aims is to be the highest quality supplier in the market place. In order to achieve this, the head of the aerospace division has already started a project to implement just-in-time (JIT) manufacturing. An extract of his email proposing this change is given in Appendix 3. The CEO feels that there are some important elements hinted at but not developed in this email. In particular, the CEO wants you to explain the problems of moving to JIT manufacturing.
Required:
Prepare a report to the board of Boltzman to:
498 人做过
【简答题】
You have recently been approached by Fred Flop. Fred informs you that he is experiencing problems in dealing with
aspects of his company tax returns. The company accountant has been unable to keep up-to-date with matters, and
Fred also believes that mistakes have been made in the past. Fred needs assistance.
The following information has been extracted from client files and from meetings with the shareholders. Assume
that today's date is 20 May 2013.
Fred Flop:
· 100% shareholder of Flop Limited.
· Managing director.
Flop Limited:
· UK trading company.
· Taxable profits of ￡595,000 in the year ended 31 March 2010.
· Has one wholly owned subsidiary.
· Both companies have a 31 March year-end.
Corporation tax return (CT600) for the year ended 31 March 2011:
· The corporation tax return for this period was not submitted until 2 November 2012, and corporation tax of
￡123,500 was paid at the same time. Taxable total profits were stated as ￡741,800.
· A formal notice (0T203) requiring the company to file a self-assessment corporation tax return (dated
1 February 2012) had been received by the company on 4 February 2012.
Examination of the accounts and tax computation for the year ended 31 March 2011:
· A ￡10,000 repairs provision was made; there is no supporting information.
· ￡46,500 legal and professional fees allowed in full without any explanation. Fred has subsequently produced
the following analysis:
Analysis of legal & professional fees
￡
Legal fees on a failed attempt to secure a trading loan 5,000
Debt collection agency fees 12,800
Obtaining planning consent for building extension 5,700
Accountant's fees for preparing accounts 14,000
Legal fees relating to a trade dispute 9,000
· No enquiry has yet been raised by HMRC.
CT600 for the year ended 31 March 2012:
· Has not been submitted yet.
· Accounts are late and nearing completion, with only one change still to be made.
· A notice requiring the company to file a self-assessment corporation tax return (0T203) dated 27 July 2012
was received on 1 August 2012. No corporation tax has yet been paid.
· Computation currently shows taxable total profits of ￡815,000 before accounting adjustments.
· A company owing Flop Ltd ￡50,000 (excluding VAT) has gone into liquidation, and it is unlikely that any of
this money will be paid. The money has been outstanding since 3 September 2011 (which was also the tax
point for the supply), and the impairment loss (bad debt) will need to be included in the accounts.
· Computer equipment totalling ￡50,000 had been expensed in the accounts. No adjustment has been made in the
tax computation. The annual investment allowance has already been used during the year ended 31 March 2012.
VAT issues:
· VAT return for the quarter ended 31 March 2013 was submitted on 15 May 2013, and VAT of ￡24,000 was
paid at the same time.
· Previous return to 31 December 2012 was also submitted late.
· No account has been made for VAT on the bad debt.
· VAT return for 30 June 2013 may also be late. Estimated VAT liability is ￡8,250.
Required
(a) (i) Calculate the revised corporation tax (CT) payable for the accounting periods ending 31 March 2011
and 2012 respectively. Your answer should include an explanation of the adjustments made as a
result of the information which has now come to light and the practical steps needed to correct the
position.
(ii) State, giving reasons, the due payment date of the corporation tax (CT) and the filing date of the
corporation tax return for each period, and identify any interest and penalties which may have arisen
to date.
Assume that the rates and allowances for Financial Year 2011 apply throughout this part and interest on
overdue tax is 3%.
(b) Explain the consequences of filing the VAT returns late and advise Fred how he should deal with the
underpayment and bad debt for VAT purposes. Your explanation should be supported by relevant
calculations.
aspects of his company tax returns. The company accountant has been unable to keep up-to-date with matters, and
Fred also believes that mistakes have been made in the past. Fred needs assistance.
The following information has been extracted from client files and from meetings with the shareholders. Assume
that today's date is 20 May 2013.
Fred Flop:
· 100% shareholder of Flop Limited.
· Managing director.
Flop Limited:
· UK trading company.
· Taxable profits of ￡595,000 in the year ended 31 March 2010.
· Has one wholly owned subsidiary.
· Both companies have a 31 March year-end.
Corporation tax return (CT600) for the year ended 31 March 2011:
· The corporation tax return for this period was not submitted until 2 November 2012, and corporation tax of
￡123,500 was paid at the same time. Taxable total profits were stated as ￡741,800.
· A formal notice (0T203) requiring the company to file a self-assessment corporation tax return (dated
1 February 2012) had been received by the company on 4 February 2012.
Examination of the accounts and tax computation for the year ended 31 March 2011:
· A ￡10,000 repairs provision was made; there is no supporting information.
· ￡46,500 legal and professional fees allowed in full without any explanation. Fred has subsequently produced
the following analysis:
Analysis of legal & professional fees
￡
Legal fees on a failed attempt to secure a trading loan 5,000
Debt collection agency fees 12,800
Obtaining planning consent for building extension 5,700
Accountant's fees for preparing accounts 14,000
Legal fees relating to a trade dispute 9,000
· No enquiry has yet been raised by HMRC.
CT600 for the year ended 31 March 2012:
· Has not been submitted yet.
· Accounts are late and nearing completion, with only one change still to be made.
· A notice requiring the company to file a self-assessment corporation tax return (0T203) dated 27 July 2012
was received on 1 August 2012. No corporation tax has yet been paid.
· Computation currently shows taxable total profits of ￡815,000 before accounting adjustments.
· A company owing Flop Ltd ￡50,000 (excluding VAT) has gone into liquidation, and it is unlikely that any of
this money will be paid. The money has been outstanding since 3 September 2011 (which was also the tax
point for the supply), and the impairment loss (bad debt) will need to be included in the accounts.
· Computer equipment totalling ￡50,000 had been expensed in the accounts. No adjustment has been made in the
tax computation. The annual investment allowance has already been used during the year ended 31 March 2012.
VAT issues:
· VAT return for the quarter ended 31 March 2013 was submitted on 15 May 2013, and VAT of ￡24,000 was
paid at the same time.
· Previous return to 31 December 2012 was also submitted late.
· No account has been made for VAT on the bad debt.
· VAT return for 30 June 2013 may also be late. Estimated VAT liability is ￡8,250.
Required
(a) (i) Calculate the revised corporation tax (CT) payable for the accounting periods ending 31 March 2011
and 2012 respectively. Your answer should include an explanation of the adjustments made as a
result of the information which has now come to light and the practical steps needed to correct the
position.
(ii) State, giving reasons, the due payment date of the corporation tax (CT) and the filing date of the
corporation tax return for each period, and identify any interest and penalties which may have arisen
to date.
Assume that the rates and allowances for Financial Year 2011 apply throughout this part and interest on
overdue tax is 3%.
(b) Explain the consequences of filing the VAT returns late and advise Fred how he should deal with the
underpayment and bad debt for VAT purposes. Your explanation should be supported by relevant
calculations.
497 人做过
【组合题】Beeshire Local Authority (BLA) is a local government body which provides a range of services for the area of Beeshire within the country of Seeland. Beeshire is a wealthy area within the country with many tourist attractions. One of BLA’s tasks is to ensure that waste is collected from the homes and businesses in Beeshire. The goal for BLA’s waste management department is ‘to maintain Beeshire as a safe, clean and environmentally friendly place where people and businesses want to both stay in and return to.’ The need for waste collection is linked to public health concerns, the desire to keep the streets clean and attractive and the desire to increase the amount of rubbish which is recycled. BLA is funded through a single local tax and does not charge its residents or businesses separately for most of its services, including waste collection. There is no public or political appetite for outsourcing services such as waste management.
Waste collection is performed by the workforce using a fleet of vehicles. The waste is either taken to recycling plants or else to landfill sites for burying. BLA obtains revenues from all the recycled waste but this only just covers the cost of running the recycling facilities.
Against a background estimate that waste will increase by 1% p.a. in the future, the national government has ordered local authorities, such as BLA, to promote the recycling of waste and has set a target of 40% of all waste to be recycled by 2015. In order to discourage the creation of non-recyclable waste, the government has imposed a levy per tonne of waste buried in landfill sites and has stated that this levy will rise over the next five years in order to encourage continuing improvement in the amount of recycled waste.
Currently, Seeland is in a long recession and so local authority revenues have fallen as tax revenues reflect the poor state of the economy. Along with other local authorities, BLA has tried to cut costs and so has focused on financial measures of performance. In a recent, private meeting, the chief executive of BLA was heard to say ‘keep costs under control and we will worry about quality of service only when complaint levels build to an unacceptable level.’ As one of the area’s largest employers, cutting staff numbers has been very difficult for BLA due to the impact on the local economy and the reaction of the residents.
The current performance indicators used at BLA are drawn from the existing information systems with national figures given for comparison. Those relating to waste collection for the year ending 31 March 2014 are:
497 人做过
【简答题】
2、You are responsible for performing Engagement Quality Control Reviews on selected audit clients of Crocus & Co, and you are currently performing a review on the audit of the Magnolia Group (the Group). The Group manufactures chemicals which are used in a range of industries, with one of the subsidiaries, Daisy Co, specialising in chemical engineering and developing products to be sold by the other Group companies. The Group’s products sell in over 50 countries.
A group structure is shown below, each of the subsidiaries is wholly owned by Magnolia Co, the parent company of the Group：
484 人做过
【组合题】1.Yilandwe
Yilandwe, whose currency is the Yilandwe Rand (YR), has faced extremely difficult economic challenges in the past 25 years because of some questionable economic policies and political decisions made by its previous governments.Although Yilandwe’s population is generally poor, its people are nevertheless well-educated and ambitious. Just over three years ago, a new government took office and since then it has imposed a number of strict monetary and fiscal controls, including an annual corporation tax rate of 40%, in an attempt to bring Yilandwe out of its difficulties. As a
result, the annual rate of inflation has fallen rapidly from a high of 65% to its current level of 33%. These strict monetary and fiscal controls have made Yilandwe’s government popular in the larger cities and towns, but less popular in the rural areas which seem to have suffered disproportionately from the strict monetary and fiscal controls.
It is expected that Yilandwe’s annual inflation rate will continue to fall in the coming few years as follows:
Yilandwe’s government has decided to continue the progress made so far, by encouraging foreign direct investment into the country. Recently, government representatives held trade shows internationally and offered businesses a number of concessions, including:
(i) zero corporation tax payable in the first two years of operation; and
(ii) an opportunity to carry forward tax losses and write them off against future profits made after the first two years.
The government representatives also promised international companies investing in Yilandwe prime locations in towns and cities with good transport links.
Imoni Co
Imoni Co, a large listed company based in the USA with the US dollar ($) as its currency, manufactures high tech diagnostic components for machinery, which it exports worldwide. After attending one of the trade shows, Imoni Co is considering setting up an assembly plant in Yilandwe where parts would be sent and assembled into a specific type of component, which is currently being assembled in the USA. Once assembled, the component will be exported directly to companies based in the European Union (EU). These exports will be invoiced in Euro (€).
Assembly plant in Yilandwe: financial and other data projections
It is initially assumed that the project will last for four years. The four-year project will require investments of YR21,000 million for land and buildings, YR18,000 million for machinery and YR9,600 million for working capital to be made immediately. The working capital will need to be increased annually at the start of each of the next three years by Yilandwe’s inflation rate and it is assumed that this will be released at the end of the project’s life.
It can be assumed that the assembly plant can be built very quickly and production started almost immediately. This is because the basic facilities and infrastructure are already in place as the plant will be built on the premises and grounds of a school. The school is ideally located, near the main highway and railway lines. As a result, the school will close and the children currently studying there will be relocated to other schools in the city. The government has kindly agreed to provide free buses to take the children to these schools for a period of six months to give parents time to arrange appropriate transport in the future for their children.
The current selling price of each component is €700 and this price is likely to increase by the average EU rate of inflation from year 1 onwards.
The number of components expected to be sold every year are as follows:
The parts needed to assemble into the components in Yilandwe will be sent from the USA by Imoni Co at a cost of $200 per component unit, from which Imoni Co would currently earn a pre-tax contribution of $40 for each component unit. However, Imoni Co feels that it can negotiate with Yilandwe’s government and increase the transfer price to $280 per component unit. The variable costs related to assembling the components in Yilandwe are currently YR15,960 per component unit. The current annual fixed costs of the assembly plant are YR4,600 million. All these costs, wherever incurred, are expected to increase by that country’s annual inflation every year from year 1 onwards.
Imoni Co pays corporation tax on profits at an annual rate of 20% in the USA. The tax in both the USA and Yilandwe is payable in the year that the tax liability arises. A bilateral tax treaty exists between Yilandwe and the USA. Tax allowable depreciation is available at 25% per year on the machinery on a straight-line basis.
Imoni Co will expect annual royalties from the assembly plant to be made every year. The normal annual royalty fee is currently $20 million, but Imoni Co feels that it can negotiate this with Yilandwe’s government and increase the royalty fee by 80%. Once agreed, this fee will not be subject to any inflationary increase in the project’s four-year period.
If Imoni Co does decide to invest in an assembly plant in Yilandwe, its exports from the USA to the EU will fall and it will incur redundancy costs. As a result, Imoni Co’s after-tax cash flows will reduce by the following amounts:
Imoni Co normally uses its cost of capital of 9% to assess new projects. However, the finance director suggests that Imoni Co should use a project specific discount rate of 12% instead.
480 人做过
【组合题】
471 人做过