Registered AITI Tax Qualification Info and Questions

Confused99 · 30-12-2010 4:45pm

TheScriptFan wrote: »

Yes I am going to do a CGT calc as an appendix. I know we don't the price of the items but we do know that the property is 9m of the 10m so will work from that. Although I don't know the CGT rate for the UK. Will have to look that up. Just to demonstrate the DTA credit.
Can S400 apply if the subsidary is not in the state?

Progress is very slow with me!

I'm finding this assignment really tricky. How do you demonstrate the dt foreign credit relief for chargeable gains? Didn't see it in chapter 11. Thanks

Pinkypod007 · 30-12-2010 5:25pm

This assignment is damn hard

Has any-one approached a qualified tax consultant for help/tips?? Im pretty sure that some of tax depts in big four would have some-one "assisting" students with it..

TheScriptFan · 30-12-2010 6:42pm

Confused99 wrote: »

I'm finding this assignment really tricky. How do you demonstrate the dt foreign credit relief for chargeable gains? Didn't see it in chapter 11. Thanks

S826 will give you this relief..

gallyer · 31-12-2010 2:51pm

Hey,

Has anyone found any good articles to help with this assignment? I'm struggling!! Back to work on Monday so need to get it out of the way, feel like I'm going around in circles.

TheScriptFan · 31-12-2010 3:31pm

gallyer wrote: »

Hey,

Has anyone found any good articles to help with this assignment? I'm struggling!! Back to work on Monday so need to get it out of the way, feel like I'm going around in circles.

Hi there...there was one from Lavelle & Coleman that I found quite helpful. At this stage I'm struggling to get it completed at all. It's so difficult to get it all together. I'm trying to concentrate on getting something basic together that makes some sense so I'm sure I'll miss out alot of the more technical points but trying not to trip myself up!!

Confused99 · 31-12-2010 6:03pm

Thanks a million for that I've went with subsidiary for first part after tons of research! Yeah s400 doesn't apply to non-residents Is there is a relief for foreign company if you go from branch to sub? Yeah the second part is tougher I think - interest one is not straightforward What's everyone think I'm only looking at it now

TheScriptFan · 01-01-2011 3:22pm

Confused99 wrote: »

Thanks a million for that I've went with subsidiary for first part after tons of research! Yeah s400 doesn't apply to non-residents Is there is a relief for foreign company if you go from branch to sub? Yeah the second part is tougher I think - interest one is not straightforward What's everyone think I'm only looking at it now

Did you think they would be able to use the losses of the subsidiary through the M&S ruling? I would prefer the setting up of a subsidiary as it is much cleaner, however obviously if they can't use the losses it wouldn't be a good idea. I thought perhaps because they turn profitable in year 3 you would not get away with the cross border loss relief using the M&S case? A change from a branch to a subsidiary would give rise to a CGT charge I believe.
For the interest - I have looked at thin capitalisation, S130(2)(d)(iv) and that's about as far as I have gotten!! What do you think?

gallyer · 02-01-2011 12:41pm

I think for the interest look to Section 247, with a mention that thin capitalisation rules may apply in the UK. The section 130 only applies to close companies i think.

I am going to suggest operating through a branch initially to avail of loss relief (M&S won't apply - the notes at end of question set this out) and then converting to a subsidiary pre-sale to avail of the relief. Have a little research to do on consequences of converting branch to subsidiary.

I'm having most difficulty at the moment with selling the business when its operated through a branch, has anyone got any useful tips? It would be greatly appreciated!!

dcarlito · 02-01-2011 1:46pm

Ya reckon branch initially then transfer to sub. Cant find any relief that will apply to the subsequent transfer so there will be a CGT hit as far as I can see - s400 applies to trade in state only. What computations do ye reckon we have to include in the appendix?

cortezfloyd · 02-01-2011 3:29pm

gallyer wrote: »

Hey,

Has anyone found any good articles to help with this assignment? I'm struggling!! Back to work on Monday so need to get it out of the way, feel like I'm going around in circles.

Use the Taxfind search function especially through the ITI CT 2010 commentary book, and seminars (e.g. "Foreign Tax Credits Across all Tax Heads and Double Tax Relief - Noel Cunningham" March 2009). If anyone sees any other good articles please let us know...

Confused99 · 02-01-2011 3:33pm

Yes I'm going subsidiary but can't avail of loss relief. Not going branch to sub because you are getting hit with cgt on transfer to sub. Looked at s617 for relief on transfer but not sure if they are chargeable assets. What do you think?

For interest I'm going with S247.
Thanks

TheScriptFan · 02-01-2011 4:44pm

I am wondering what people think of the 'Participation Exemption' S626B so as not to have a chargeable gain in Ireland at all, rather than the DTA and getting credit that way?

bubblicious · 02-01-2011 4:47pm

I hadn't thought about the branch->subsidiary part. Would it be S.615 or S.617? You could probably argue both but I think S.615 would work better because the section is designed for giving relief for company reconstructions? Regardless it would appear that you would get CGT relief because the assets are chargeable assets (i.e. if they were disposed of to a third party, any gain on the disposal would result in a chargeable gain for the company). Also, the subsidiary company would be resident in Ireland under the UK/Ireland treaty.

Just wondering how you make the S.615 or S.617 election? Do you need to submit a written election to Revenue - if that was the case, for S.617 you may have to make an election to Revenue for each of the assets individually.

I'm the same with the interest -S.247. Whether it should be in TBL or the UK company I'm not sure though! Initially I would have said to have it in TBL but that was when I was going to set up the UK company as a sub from the start.

bubblicious · 02-01-2011 4:51pm

TheScriptFan wrote: »

I am wondering what people think of the 'Participation Exemption' S626B so as not to have a chargeable gain in Ireland at all, rather than the DTA and getting credit that way?

That's what I'm going to say. You'd have to have a subsidiary and would have to hold more than 5% of the ordinary share capital/assets on winding up for 12 months before selling the company.

Also, one of my friend's works in a Big 4 tax dept and she said that they're not getting any help!

Confused99 · 02-01-2011 5:29pm

Yeah me too for sub only and DTA for branch. Is that what you mean?

Not sure about s615 - what about the bona fida test?

Where it says there is no requirement to comment on company residency issues are you not making reference to explaining PE or foreign residence? I would have presumed that is important for leading onto double taxation etc.

vinnychase · 02-01-2011 5:35pm

gallyer wrote: »

I think for the interest look to Section 247, with a mention that thin capitalisation rules may apply in the UK. The section 130 only applies to close companies i think.

I am going to suggest operating through a branch initially to avail of loss relief (M&S won't apply - the notes at end of question set this out) and then converting to a subsidiary pre-sale to avail of the relief. Have a little research to do on consequences of converting branch to subsidiary.

I'm having most difficulty at the moment with selling the business when its operated through a branch, has anyone got any useful tips? It would be greatly appreciated!!

Isn't TBL a close company though so s130(2)(d)(iv) would apply?
not sure whether to go with s247 or s130(2)(d)(iv)??
Anyone any thoughts on which best way to structure the loan would be?

I'm thinking of a branch for the first few years as sub can't avail of loss relief, then transfer to sub prior to sale to avail of 626B relief?

bubblicious · 02-01-2011 5:41pm

I agree about the residency issue - I would have thought that we would need to cover off on it to some extent but maybe it's because the management and control will always be in Ireland so we don't need to go in to too much detail on it, just maybe a line or two to cover ourselves? Any ideas on that?

I wonder could you just state that the bona fide reason is to make it more attractive to sell in the future? That is a real commercial reason!

TheScriptFan · 02-01-2011 5:49pm

vinnychase wrote: »

Isn't TBL a close company though so s130(2)(d)(iv) would apply?
not sure whether to go with s247 or s130(2)(d)(iv)??
Anyone any thoughts on which best way to structure the loan would be?

I'm thinking of a branch for the first few years as sub can't avail of loss relief, then transfer to sub prior to sale to avail of 626B relief?

I had thought about that set-up for trading as a branch first and then transfer to a subs, but I think you may be caught by S634, and have a clawback of the profits you had sheltered via the loss, thus making it redundant anyway. Not 100% on that still researching it!
I would have thought S130(2)(d)(iv) would apply also, however in our Part 2 manual, Pg 103, it states ' in practice S130(2)(d)(iv) only affects companies who choose not to make the election for trade interest....etc so I tend to think S247 is more applicable.

Confused99 · 02-01-2011 6:25pm

vinnychase wrote: »

I'm thinking of a branch for the first few years as sub can't avail of loss relief, then transfer to sub prior to sale to avail of 626B relief?

Is CGT charge on transfer from branch to sub not potentially higher than benefit of loss relief by having sub in first 2 years and therefore is sub not better from start?

gallyer · 02-01-2011 8:06pm

Page 129 of the Part 3 Business book says that thin capitalisation rules don't really exist in Ireland but for Irish companies establishing subsidaries abroad must be aware of the rules in place in that territory (re thin capitalisation).

Thanks for the pointer to s615-7 for reconstruction!

Has anyone dealt with the sale of the business as a branch?? Im stuck on that, have the rest of it answered (good or bad it'll do now!) - the more i read the less confident i become in what i have done so i think i'll just leave it at what i have for now!

dcarlito · 02-01-2011 8:36pm

Thanks for the pointer to s615-7 for reconstruction!

I dont think this applies - See notes to s 617 and the Revenue Precedent. s.616 confines relief to where both companies resident in the State.

Any ideas what calculations are expected generally throughout the assignment??

Confused99 · 02-01-2011 9:04pm

Hi Guys

How do you reference in the articles of the DTA?

Thanks

gallyer · 03-01-2011 12:03am

For DTA, just eg Article 5 Ireland-UK DTA. Don't know if this correct but its what I'm doing.

How are people dealing with the sale of branch business? Does the CGT credit from the UK pretty much cover the CGT in Ireland? and are you factoring in capital allowances for equipment etc?

TheScriptFan · 03-01-2011 2:16pm

Is it okay to quote from the letter given in the solution - the first page, regarding not being liable...I was just going to copy it straight from the answer, as obviously it's the standard answer and just reference it at the end...but I wondered would I be better off coming up with my own one?

gallyer · 03-01-2011 2:23pm

Yeah i think thats ok, its a pretty standard opening few paragraphs so i think thats probably ok. Maybe not exactly word for word.

Is it just me or does the sale of branch assets not give rise to any additional tax as the credits from uk will cover tax arising in ireland, thats what im coming up with, but i dont trust myself that its right!

Legend100 · 03-01-2011 4:44pm

are we to lay it out the file note exactly as is in the model solution?

i.e with the boxes in relation to the sources, meaning and consequence?

i'm not very good with word 2007 sadly

TheScriptFan · 03-01-2011 5:07pm

Legend100 wrote: »

are we to lay it out the file note exactly as is in the model solution?

i.e with the boxes in relation to the sources, meaning and consequence?

i'm not very good with word 2007 sadly

i wouldn't worry about the boxes etc, if you can't do them. I shouldn't imagine that'd be a big deal at all. May stick with the headings, as I find they keep you focussed! Well me at least. Glad it's finally coming to an end. I had hoped to be totally wrapped up by today, but got side-tracked! Almost there though!! I don't think I'm turning in a very high quality paper though

vinnychase · 03-01-2011 6:49pm

potentially ye... havent really made my mind fully up on it... Altho if trade isnt sold after 3 years - repatriating dividends in a sub will trigger double charge to CGT whereas same problem won't arise for a branch...
finding it hard to come to a definite conclusion on this - it isn't clear cut at all

vinnychase · 03-01-2011 8:09pm

Confused99 wrote: »

Is CGT charge on transfer from branch to sub not potentially higher than benefit of loss relief by having sub in first 2 years and therefore is sub not better from start?

potentially ye... havent really made my mind fully up on it... Altho if trade isnt sold after 3 years - repatriating dividends in a sub will trigger double charge to CGT whereas same problem won't arise for a branch...
finding it hard to come to a definite conclusion on this - it isn't clear cut at all

Confused99 · 04-01-2011 2:47pm

Hi Guys

Did anyone find a CGT relief section on the transfer of branch assets to subsidiary or is it chargeable to CGT?

Thanks,

Hope the assignments are going well.

Registered AITI Tax Qualification Info and Questions

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