Your manager has sent you a memorandum in relation to the Harrow Tan Ltd group. An extract from the memorandum and a schedule of group information prepared by Corella, the group finance director, are set out below.
Memorandum from your manager – dated 7 September 2017
Required: Prepare the meeting notes as requested by your manager. The following marks are available:
(iv) Tosca Ltd – promotion of new product. (6 marks)
Charlotte is the owner of Bamburg Ltd. She requires advice on the value added tax (VAT) flat rate scheme, the sale of a substantial item of machinery, and the alternative methods by which she can extract additional funds from the company.
Charlotte:
– Is UK resident and UK domiciled.
– Owns 100% of the ordinary share capital of Bamburg Ltd.
Bamburg Ltd:
– Is a UK resident trading company which pays corporation tax at the small profits rate.
– Is registered for VAT.
– Has budgeted sales revenue for the year ending 31 March 2015 of £120,000 excluding VAT.
– Makes wholly standard rated supplies apart from £6,000 of exempt supplies.
– Has a nil tax written down value on its main pool as at 31 March 2014.
– Will not purchase any plant and machinery in the year ending 31 March 2015.
Required:
(a) Explain, with reference to the information provided, whether or not Bamburg Ltd would be permitted to join the value added tax (VAT) flat rate scheme and set out the matters which would need to be considered in order to determine whether or not it would be financially beneficial for the company to do so. (5 marks)
You have received an email from your manager with an attached schedule in connection with the Forti Ltd group of
companies. The schedule and the email are set out below.
Email from your manager
The Forti Ltd group
Forti Ltd has an issued share capital of 120,000 ordinary shares. It is owned by 12 shareholders, each of whom owns 10,000 ordinary shares.
All six of the companies are trading companies. Gordini Co is resident in and trades in the country of Arrowsia; it does not carry out any activities in the UK. The other five companies are all resident in the UK. There is no double tax treaty between Arrowsia and the UK.
The work I require you to do is set out below.
(c) Value added tax (VAT) annual accounting scheme
The management of the Forti Ltd group have asked for advice on the VAT annual accounting scheme.
State the conditions which must be satisfied by any company wishing to operate the annual accounting scheme and explain the operation of the scheme.
Tax manager
Required:
Carry out the work required as set out in the email from your manager. The following marks are available.
(c) Value added tax (VAT) annual accounting scheme. (5 marks)
Note: Ignore value added tax (VAT). (12 marks)