Registered AITI Tax Qualification Info and Questions

smpc · 07-06-2011 07:29PM

hey guys,

i note that Rajesh wants a "CT compliance calendar for 1st yr"

and also part 3 of Q asks for "step plan of actions needs to meet NewCo's CT obligations"

are these the same things?

are we just setting our prelim tax and return deadlines and including the payments of Withholding tax under s. 239?

anything else occur to anyone?

shellcarroll · 07-06-2011 07:40PM

smpc wrote: »

hey guys,

i note that Rajesh wants a "CT compliance calendar for 1st yr"

and also part 3 of Q asks for "step plan of actions needs to meet NewCo's CT obligations"

are these the same things?

are we just setting our prelim tax and return deadlines and including the payments of Withholding tax under s. 239?

anything else occur to anyone?

only thing else I can think of is application to Revenue for clearance if relying on provisions of DTA for exemption from withholding taxes.

Please tell me if I'm miles off the mark, but are you going into any detail on CT groups and appropriate reliefs available?

Nicky7520 · 07-06-2011 07:42PM

Does s.443 manufacturing relief apply? ...

shellcarroll · 07-06-2011 07:58PM

Nicky7520 wrote: »

Does s.443 manufacturing relief apply? ...

I thought manufacturing relief was abolished

smpc · 07-06-2011 08:01PM

Nicky7520 wrote: »

Does s.443 manufacturing relief apply? ...

scared me there!

see CT ITI book 12.14.3 - abolished.

smpc · 07-06-2011 08:16PM

any thoughts on whether the interest will be treated as a distribution under 130 2 d iv?

livindublin · 07-06-2011 10:02PM

smpc wrote: »

yeah but I do not think there would be a TP issue - as Legislation only replaces consideration with MV where payment is in excess of MV or receipt is less than MV.

therefore, if we use isle of man - we cud charge nil without TP issue. however, MV should be charged to maximise profits taken out of 12.5% charge and into nil charge. have you confirmed that CT deduction is available for TM royalties paid?

I'm pretty sure the deduction is available! Have spoken to a few people about the TP issue here and they seem to think you'd have to impose MV on the Isle Of Man royalties. Is there a reason you think TP is irrelevant here?

smpc · 07-06-2011 10:07PM

livindublin wrote: »

I'm pretty sure the deduction is available! Have spoken to a few people about the TP issue here and they seem to think you'd have to impose MV on the Isle Of Man royalties. Is there a reason you think TP is irrelevant here?

I tink TP issue only occurs where u go above MV.

however i think MV should be imposed as it maxmises movement from 12.5% irish tax to nil IoM tax w/o creating a TP problem.

I think i may just not have been clear?

smpc · 07-06-2011 10:11PM

are you saying that TP dictates that MV must be imposed?

Can you tell me the basis for this?

livindublin · 07-06-2011 10:32PM

smpc wrote: »

are you saying that TP dictates that MV must be imposed?

Can you tell me the basis for this?

To be honest I'm not sure on the TP issue.

I do no Corp tax at all at work but from what i've been reading TP is also there to prevent sales of goods and servies between group co's at lower prices to a company in a low tax jurisdiction who can sell for a higher price but with a fraction of the CT liability. But I could be way off the mark there. Am gonna spend a good bit of time on the TP issues I think.

livindublin · 07-06-2011 10:33PM

smpc wrote: »

I tink TP issue only occurs where u go above MV.

however i think MV should be imposed as it maxmises movement from 12.5% irish tax to nil IoM tax w/o creating a TP problem.

I think i may just not have been clear?

Ah i get you now! Good point!

smpc · 07-06-2011 10:35PM

what are people doing about the Patents?

they will be a charge on income
withholding tax will apply
re tp anywhere from nil to mv (500k) can be charged

i am thinking charge nil to avoid w/t? thoughts?

mehew · 08-06-2011 03:33PM

this is a horrible assignment!!!

As regards the Noddy reference, the person I spoke to said to reference moving the two IP co to Ireland, even if not specifically asked for, it is a very common issue in practise which would not, in normal circumstances, be ignored when advising a client!

As regards the whole TM issue, I am very confused by this. It is definately not a relevant payment therefore no WHT tax applies, I think you are right about the 'pure profit point' removing it from the definition of an annual payment, I'm going back to the CT expert about this tonight so hopefully they will have an answer. The only reference I could find was in 19.1 of Business Taxes Part 2. As regards the deductibility, the payment is definately deductible but i'm just not sure under what section, at this stage I'm just going with s81.

For the head office recharge it is a s81 'wholly and exclusively' expense once not excessive and a break down available.

Gonzalo123 · 08-06-2011 04:22PM

I think you're probably right with the patents, however a couple of things have occurred to me:

Are the patent royalties not know-how under S768, which would be a deductible against profits rather than a charge on income?

Also the acquisition of a licence for a patent - is this an asset with CGT implications?

Mehew - In relation to the suggestion to moving the two IP companies to Ireland - Can you expand on this? How would you move them?

smpc · 08-06-2011 08:30PM

Gonzalo123 wrote: »

I think you're probably right with the patents, however a couple of things have occurred to me:

Are the patent royalties not know-how under S768, which would be a deductible against profits rather than a charge on income?

Also the acquisition of a licence for a patent - is this an asset with CGT implications?

Mehew - In relation to the suggestion to moving the two IP companies to Ireland - Can you expand on this? How would you move them?

768 has me very confused.... i am inclined to think that it does not come withint the definition of "know how" and that it should be treated as a charge on income. i have no great basis for this at all though!! arghh!

re CGT implications I would think CGT on sale of patent licence is outside ambit of advice as the sale of the licence has not been proposed. in any case, i am not sure if this would be a chargeable asset.

re Mehew's comment - of moving two companies. i am inclined to think that this is also outside ambit of advice (although not necessarily outside ambit of advice in real life situation). i refer to this extract from the Q

"There is not requirement to comment on the treatment of any items in foreign jurisdictions or to suggest any alternative structuring options."

thoughts on these points are most welcome - my brain is fried!

Gonzalo123 · 08-06-2011 09:12PM

I'm gonna go with a charge on income..it's a tricky one!

Yeah, great point, that would be akin to a structuring option which is not required as part of the question.

In relation to the technical support from Indonesia- what do people see as the issues there?

* No transfer pricing issue
* No withholding tax
* Expenses deductible

What do you think?

smpc · 08-06-2011 09:36PM

Gonzalo123 wrote: »

I'm gonna go with a charge on income..it's a tricky one!

Yeah, great point, that would be akin to a structuring option which is not required as part of the question.

In relation to the technical support from Indonesia- what do people see as the issues there?

* No transfer pricing issue
* No withholding tax
* Expenses deductible

What do you think?

re charge or 768 on patents - yeah i agree even though i do feel that i am flipping a coin here on this point.

re Technical support, i agree with your analysis. i think i am worried about this bcos it seems to straight forward to say there are no issues and you can deduct but i cant see anything else on this one.

what are people's word counts or page counts like?

ascuteasabutton · 09-06-2011 09:08AM

Anybody doing Part 2 assignment...how did people find it?

soft landing · 09-06-2011 09:29AM

Working on Part 2 assignment myself. Finding it very hard to complete as on some of the topics you could write about them forever. Trying to keep the file note and letter as short as I can make it. I am a bit thrown by the first query from the client (residence, domicile & tax implications) and i have gone off on a bit of a tangent on it (it makes up about half of the file note), have gone through, patent exemption, High Earners Restriction for Cyril (even though im not sure if the questions are looking for this). Should be interesting to see what the model answer looks like!
Any ideas on the Maintenance issue? Is there anything to stop Marian getting (preference) shares in the UK company & remitting the dividends to a UK bank account (for when she moves home) thus avoiding Irish tax as she is on remittance basis?

ascuteasabutton · 09-06-2011 09:36AM

soft landing wrote: »

Working on Part 2 assignment myself. Finding it very hard to complete as on some of the topics you could write about them forever. Trying to keep the file note and letter as short as I can make it. I am a bit thrown by the first query from the client (residence, domicile & tax implications) and i have gone off on a bit of a tangent on it (it makes up about half of the file note), have gone through, patent exemption, High Earners Restriction for Cyril (even though im not sure if the questions are looking for this). Should be interesting to see what the model answer looks like!
Any ideas on the Maintenance issue? Is there anything to stop Marian getting (preference) shares in the UK company & remitting the dividends to a UK bank account (for when she moves home) thus avoiding Irish tax as she is on remittance basis?

not sure they are looking for that much info on the R OR Dom side of things, while it is the basis for their charges to tax, I think they are just basically asking us to explain them,apply them to Cyril and Marian and then use this as a basis for the other queries but thats just my own view.
I'm unsure about the high earners restriction so im leaving it out as I feel i could get bogged down in it.
In terms of the maintenance im just giving the options available whether they have a legal separation or whether he is paying voluntary maintenance, looking at it in that way am I wrong?

soft landing · 09-06-2011 09:54AM

ascuteasabutton wrote: »

not sure they are looking for that much info on the R OR Dom side of things, while it is the basis for their charges to tax, I think they are just basically asking us to explain them,apply them to Cyril and Marian and then use this as a basis for the other queries but thats just my own view.
I'm unsure about the high earners restriction so im leaving it out as I feel i could get bogged down in it.
In terms of the maintenance im just giving the options available whether they have a legal separation or whether he is paying voluntary maintenance, looking at it in that way am I wrong?

Agree with you re R OR & DOM side of things. The part I have gone off on a tangent is the tax implications for both for 09,10,11. The HER has made my file note very messy so might get rid of it. Not fully sure if they are looking for it but if (i think) he is entitled to Patent Royalty relief then that would be restricted by the HER.

The main thing with the maintenance i would say are the implications regarding formal/informal separation. The reason I looked into remitting income to the UK was due to the wording of one of the questions.... Something like "any maintenance agreement they might put in place". To me that means that we have to make a suggestion but I could be totally wrong!!

ascuteasabutton · 09-06-2011 10:01AM

soft landing wrote: »

Agree with you re R OR & DOM side of things. The part I have gone off on a tangent is the tax implications for both for 09,10,11. The HER has made my file note very messy so might get rid of it. Not fully sure if they are looking for it but if (i think) he is entitled to Patent Royalty relief then that would be restricted by the HER.

The main thing with the maintenance i would say are the implications regarding formal/informal separation. The reason I looked into remitting income to the UK was due to the wording of one of the questions.... Something like "any maintenance agreement they might put in place". To me that means that we have to make a suggestion but I could be totally wrong!!

Im very unsure on the patent royalty issue aswell so I have a small section on it and that he could possibly be entitled to it and that we may require more info on the company to confirm this!
I see what you mean about the maintenance thing but as they havent mentioned anything about her remitting income to the UK im going to leave it out.I have explored he options/benefits of a formal and informal separation agreement and how it would probably be of more benefit to put a formal agreement in place!
Finding it very hard to finish off just putting the letter together! There is no guidance on word count etc so I don't know if I have gone completely off!

soft landing · 09-06-2011 10:14AM

ascuteasabutton wrote: »

Im very unsure on the patent royalty issue aswell so I have a small section on it and that he could possibly be entitled to it and that we may require more info on the company to confirm this!
I see what you mean about the maintenance thing but as they havent mentioned anything about her remitting income to the UK im going to leave it out.I have explored he options/benefits of a formal and informal separation agreement and how it would probably be of more benefit to put a formal agreement in place!
Finding it very hard to finish off just putting the letter together! There is no guidance on word count etc so I don't know if I have gone completely off!

From the looks of the past paper solutions they run to about 20 pages for the file note and 10 pages for the letter so give or take 2-3 pages is probably what they are looking for. Will be nice to have it out of the way come Friday. It has taken up a lot of my time over the past 2 weeks! Still need to do the step plan but that should be ok i hope.

mehew · 09-06-2011 10:18AM

yes, i think the Noddy point is less relevant know since the information provided re the expenses for both companies is probably there to show the trademark is not pure income profit.

As regards the know how point, i dont think thats relevant when you read the definition of know how.

I'm treating the recharge as a normal s81 expense (deductible, no WHT), it's surprising it doesn't come up in any of the reading material as it is something that is very common in practise.

Trying to get this finished today, I'm quite sick of CT now!

mehew · 09-06-2011 10:20AM

also to the best of my knowledge, the tech support payment is also a s81 expense, if the mark up was excessive there would be a problem but its only 10% so i think that is reasonable

ascuteasabutton · 09-06-2011 10:46AM

soft landing wrote: »

From the looks of the past paper solutions they run to about 20 pages for the file note and 10 pages for the letter so give or take 2-3 pages is probably what they are looking for. Will be nice to have it out of the way come Friday. It has taken up a lot of my time over the past 2 weeks! Still need to do the step plan but that should be ok i hope.

I think im on the right track so I have 21 pages of a file note....its been the hardest project but hopefully it will be worth it! Its a pain in the ass that we haven't received Part 1 results yet..all this work could be a waste of time!

MMV · 09-06-2011 02:23PM

Word count 15,000 and not finished yet! You can really see how to the point I was with my researh! any1 elses this long? Did ye make much reference to case law? (part 3)

ascuteasabutton · 09-06-2011 02:25PM

MMV wrote: »

Word count 15,000 and not finished yet! You can really see how to the point I was with my researh! any1 elses this long? Did ye make much reference to case law? (part 3)

I'm on just over 7500 with about another 1000 to go! Worried now...:( (Part 2)

K Settes · 09-06-2011 08:00PM

I could have sworn I saw somewhere on the website - the font, size and line spacing they wanted for the assignment. I can't seem to find it now. Did I imagine it? Or is there a specific way they want it presented?

deco2011 · 09-06-2011 08:10PM

What are people's thoughts on the interest payments?

Registered AITI Tax Qualification Info and Questions

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