Profit per accounts 530,257,000. Deduct Profit on sale of fixed assets (11,000) Capital Allowances (W4) (1,120,542) Total Taxable Profits 547,329,208

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1 TOMC Nov 2017 Answers Answer 1 a) Corporation Tax computation for year ending 30 September 2017 Profit per accounts 530,257,000 Adjustments Add Depreciation 15,650,450 Pension contributions (W1) 440,000 Directors bonus (W2) 2,075,000 Research and Development Taxable RDEC (W3) 38,300 18,203,750 Deduct Profit on sale of fixed assets (11,000) Capital Allowances (W4) (1,120,542) (1,131,542) Total Taxable Profits 547,329,208 Corporation Tax liability FY 2016 FY ,582,968 54,882, ,465,842 Less RDEC (W3) (38,300) Corporation Tax payable 109,427,542 Due dates for Corporation Tax payments Corporation Tax is due in four equal instalments on 14 April 2017; 14 July 2017; 14 October 2017 and 14 January The first three payments have already been made, totalling 79,300,500. The final payment based on the final computations will be 27,356,886. However, the company has underpaid tax in the first three instalments, of 2,770,156. This amount needs to be paid as a top-up, and interest will be charged on this underpayment. Workings W1 - Spreading of pension contributions Step 1 Does contribution exceed 210% of last year s contributions? Last year s contribution - 200, % x last year s contribution= 420,000 This year s contribution - 1,100,000 As this year s exceeds 420,000 Step 1 is met Step 2 What is excess, and does it exceed 500,000?

2 This year s contribution less (last year s x110%) 1,100,000 (200,000 x 110%) = 880,000 As this exceeds 500,000, spreading must be considered. Step 3 As the excess is less than 1m, spread over this year and next year, Excess is 880,000, so divide by 2, therefore 440,000 is allowed in year to W2 - Directors bonus The amount not paid within 9 months of year-end and therefore disallowed is 2,075,000. W3 - Research and Development Expenditure credit Company is a large company. W4 - Capital Allowances Costs Personnel 280,510 Consumables 32,070 External staff 35,600 Qualifying 348,180 RDEC (11%) 38,300 Main pool Special Enhanced R&D Allowances rate pool TWDV b/f 2,350,350 1,657,200 Additions Integral electrical 105,000 system Boiler 8,500 Machinery 1,024,360 Thermal insulation 1,365,000 R&D equipment 76,700 Annual Investment allowance (200,000) (200,000) FYA 100% (8,500) (76,700) (85,200) Disposals P&M (33,150) Car (1,750) 3,339,810 2,927,200 WDA 18% (601,166) (601,166) 8% (234,176) (234,176) Total allowances (1,120,542) TWDV c/f 2,738,644 2,693,024 Notes:

3 Suspended ceiling not eligible for allowances unless related to specific items of plant and machinery. AIA allocated to special rate pool to maximise acceleration of allowances. (b) Election to exempt overseas branches from UK Corporation Tax At present, profits from the two branches are taxed or losses relieved in the UK, so the year ended 30 September 2017, Corporation Tax payable tax on a net profit of 109,800. It is possible to elect for the branches to be exempt from UK Corporation Tax; however this election must apply to all branches of a company and is irrevocable. Therefore, any future loss arising would not be offset against UK profits; equally no profits would be taxable in the UK, and so the branches would only be taxed in the overseas jurisdictions i.e. Ruritania and Buranda. The election should be beneficial if the branch is profitable and subject to a rate of tax lower than the UK Corporation Tax rate. Where the profitable branch foreign tax rate is higher than the UK rate there would be no tax saving. The election would not be advantageous (from a UK perspective) if it resulted in branch losses not be UK tax deductible Any election is effective for the accounting period after the one in which the election is made, therefore it is now too late to make an election for the years ended 30 September 2017 and 30 September 2018; however an election made now (in the year to 30 September 2018) would be effective for the year to 30 September 2019, onwards. There are transitional rules for loss making branches, whose future profits cannot be treated as exempt until the losses in the previous six years have been matched with profits arising in subsequent periods. It is possible to apply this rule separately to a particular territory so that they do not delay the exemption of other territories, which do not have losses.

4 MARKING GUIDE TOPIC Adjustment to profit Add back depreciation Deduct profit on fixed asset disposal Pension scheme calculation of excess Pension scheme spreading and current year deduction Disallow accrued bonus Treatment of Branch profits/losses forming part of taxable profits Capital allowances Suspended ceiling not eligible Inclusion of integral electrical system in special rate pool Energy saving boiler 100% FYA Inclusion of machinery in main pool Inclusion of thermal insulation in special rate pool Inclusion of proceeds of sale of car in main pool Inclusion of proceeds of sale of P&M in main pool R&D equipment capital allowances - FYA Calculation of writing down allowance in general pool Calculation of writing down allowance in special rate pool AIA maximisation include in special pool MARKS R&D Calculating allowable amount ; disallow non-direct costs Allowing Expenditure credit Calculation of liability using correct Corporation tax rates Payment dates and amounts; amendments to Payments on account; interest Note re overseas profits Election needed Applies to all branches Effective date from following accounting period Irrevocable; effect on tax payable UK and overseas TOTAL 15

5 Answer 2 Proposed acquisition of CDE Ltd UK Tax Due Diligence Report I have reviewed the information that you provided me with in relation to the proposed acquisition of CDE Ltd and subsidiaries ( the Target Group ) by ABC plc. I set out below a draft due diligence report outlining the UK tax risks inherent in the Target Group. Please note that this report solely focuses on UK tax issues and I understand the findings of this report will be integrated into an overall report to cover all relevant jurisdictions. Issue: 1) CDE Ltd becoming a UK tax resident company. Summary of tax risks: CDE Ltd should be regarded as UK tax resident effective 1 January 2015 as central management and control has been exercised in the UK since that date. The company will be treated as an Investment Company for UK tax purposes and will also be a Dual Resident Investment Company ( DRIC ). As a consequence, CDE Ltd will not be able to group relieve losses arising from interest expense to IJK Ltd or OPQ Ltd. 2) Chargeable gain on disposal of shareholding The gain arising on the disposal by CDE Ltd of a minority shareholding in Drug Smart Inc will be subject to UK Corporporation Tax. The UK substantial Shareholding Exemption will not apply as the shareholding is less than 10%. A chargeable gain of US $35,151,050 ( 27,808,500) arises (after indexation allowance, a relief to take account of inflation). This may result in a Corporation Tax Liability of 5,353,136, subject to the availability of brought forward tax losses. 3) Possible restriction on offset of brought forward tax losses of CDE Ltd. Anti-avoidance legislation exists to prevent a purchaser of an Investment Company injecting new investments to use existing tax losses for sheltering future income and gains from those investments. It is unclear how the rules may impact at this stage but broadly relief for brought forward non-trade deficits on loan relationships (unrelieved interest expense) and expenses of management will be denied where: After the change there is a significant increase in the amount of CDE Ltd s capital, or Within the period of six years beginning three years before and ending three years after the change in ownership there is a major change in the nature of investments held by CDE Ltd, or The change in ownership occurs at any time after the scale of the activities in the business carried on by the CDE Ltd has become small or negligible and before any considerable revival of the business. You should consider the potential impact of these rules carefully in view of the chargeable gain and seek indemnification for any Corporation tax arising where an action of the Target Group may result in a restriction to the losses carried forward.

6 4) Transfer pricing Transactions between related parties should be on arm s length terms. Transfer Pricing legislation requires tax specific adjustments to be imputed where transactions are on non arm s length terms. We note the following as potential areas of concern in relation to pre-acquisition periods: The cost plus arrangements between group companies should be reviewed to determine whether margins on sales and manufacturing can be regarded as being at arm s length. The calculation of the rate of royalty paid by OPQ Ltd to FGH AG. 5) Controlled Foreign Companies ( CFCs ) FGH AG There is a risk that the profits of FGH AG may be subject to CFC apportionment as the company is unlikely to meet any of the entity level exemptions. The Temporary Period Exemption will not apply in view of CDE Ltd having become UK tax resident effective 1 January The motive test could be met such that the profits do not pass through the trading profits gateway as the original intention was not to avoid UK tax via the structure. Losses of CDE Ltd may be partially offset against any CFC apportionment for the year ended 31 December A CFC apportionment arising in respect of the two years ended 31 December 2017 will be subject to Corporation Tax with no relief available for any brought forward or current year losses in CDE Ltd. 6) Diverted Profits Tax ( DPT ) There is risk that some profits realised by FGH AG may fall within the scope of the DPT rules effective 1 April The outsourcing arrangement with IJK Ltd will result in sales revenue in excess of the 5% margin the company receives on costs being recognised in Switzerland. This profit may be subject to DPT where the arrangements can be construed as: Lacking economic substance; and/or Having a main purpose of seeking to avoid UK tax. There appears a significant risk here and this should be analysed further. Any DPT exposure is computed as follows: Tax Diverted Profits x 25% [DPT rate] + Tax Interest [currently 3%] Tax Interest runs from 6 months after a chargeable accounting period up to the date of issuance of a notice. DPT is to be self-assessed so we recommend you review this further.

7 7) Corporation Tax compliance CDE Ltd first came within the charge to Corporation Tax on 1 January2015 and should notify HMRC immediately. Late filing penalties will be due in respect of the FY 2015 Company Tax Return outstanding for CDE Ltd fixed at 1,000 and a further penalty equal to 10% of any tax due (e.g. in respect of the chargeable gain). A tax geared penalty of up to 30% of any outstanding tax due in FY 2015 may be applied where any tax payments were outstanding at 31 December 2016 with scope to reduce to 10% for unprompted notification. Interest will be applied to any tax not paid by the due dates at applicable rates and indemnification should be sought for all interest and penalties.

8 MARKING GUIDE TOPIC MARKS Tax residency: Note that CDE Ltd has become UK resident effective 1 January Comment CDE Ltd should be treated as an Investment Company State the CDE Ltd is a DRIC and related tax consequences 1.5 Chargeable gain: Calculate chargeable gain on disposal and potential Corporation Tax Liability 2 Note importance of offsetting brought forward tax losses Possible restrictions on loss relief: Identify risk that s.677 s.684 CTA 2010 may apply to limit use of brought 1 forward non-trade loan relationship deficits on change in ownership Set out circumstances under which relief for losses would be denied 2 Transfer pricing: Comment on appropriateness of cost plus arrangements 1 Comment on appropriateness of royalty rate 1 Possible CFC apportionment: Note that no entity level exemptions will apply 1 Comment why Temporary Period Exemption cannot apply Note that motive test in trading profits gateway may be met 1 State that losses cannot cover any CFC apportionment for FY 2016 and FY 2017 Diverted Profits Tax ( DPT ): Identify the risk DPT could apply to UK to activity undertaken in the UK by FGH AG and profits realised above limited returns in IJK Ltd and OPQ Ltd State conditions to be met for DPT to apply 1.5 Outline how DPT charge computed 1.5 Corporation Tax compliance: Note CDE Ltd within the charge to Corporation Tax effective 1 January 2015 [s.9(2) CTA 2009] Note late filing penalties due for FY2015 Company Tax Return of CDE Ltd Note penalty for any late payment of tax due in CDE Ltd FY 2015 Company Tax Return and scope to reduce this with unprompted notification Comment that interest payable on overdue tax Presentation and higher skills 1 TOTAL 20

9 Answer 3 Briefing Note Use of General Anti Abuse Rule Background Finance Act 2013 introduced a General Anti Abuse Rule ( GAAR ), the scope of which covers not only Corporation Tax but also Income Tax, Inheritance Tax, CGT, Stamp Duty Land Tax, National Insurance Contributions, and Diverted Profits Tax. The purpose of the GAAR is to deter (a) taxpayers from entering into abusive arrangements, and (b) advisers from promoting arrangements. An abusive arrangement is one which achieves a tax advantage and cannot reasonably be regarded as a reasonable course of action (the double reasonableness test ). A tax arrangement is one in which it would be reasonable to conclude that the main purpose, or one of the main purposes is the obtaining of a UK tax advantage. The definition of a tax advantage is not limited to merely the reduction in the amount of tax payable it can cover a repayment or increased repayment; the deferral of a tax payment or the advancement of a repayment; the relief or increased relief from tax; the avoidance of an assessment; and the avoidance of the obligation to deduct or account for tax. HMRC s published guidelines give indicators of abusive tax arrangements being in place, for example: Arrangements resulting in income, profits or gains for tax purposes that is significantly less than the amount for economic purposes; or Arrangements resulting in deductions or losses for tax purposes that are greater than the amount would be for economic purposes. However, these indicators do not apply to situations where the arrangement was wellestablished practice. The Corporation Tax Self-Assessment regime means that the GAAR should be considered when signing the Company Tax return and if necessary, adjustments should be made to the Corporation Tax liability. There is no statutory or non-statutory clearance procedure available in relation to the GAAR applying to any particular transaction. However, it is possible to obtain advance clearances for certain transactions and if such a clearance has been provided, the GAAR cannot then be later invoked in respect of the arrangements that were the focus of the clearance. Counteraction HMRC can invoke the GAAR, for example, as part of an open enquiry into a company s tax affairs. The HMRC officer conducting the enquiry must notify the company that they believe the GAAR to apply, the reasons why, together with what counteraction is proposed. However, before HMRC can proceed to counteraction, the case must be submitted to the GAAR advisory panel, which is independent of HMRC, and will give an opinion as to the arrangement. If the panel agrees that the arrangement was not a reasonable course of action, then the HMRC officer will proceed with the counteraction, which will involve amending assessments, claims or otherwise. Normal interest and penalties would apply. Where the GAAR applies it operates to counteract the tax advantage in a way that is just and reasonable. If any counteraction adjustments give rise to double taxation, the company can apply for consequential amendments to be made. If the company believes that the arrangement was not abusive, it can still appeal in the normal way to the tribunal.

10 Payment of disputed tax If HMRC raise an enquiry, they can seek to collect the disputed tax paid upfront with the issue of an Accelerated Payment Notice. Impact of Tax Treaties Multinational groups will be subject to tax in the countries in which they have permanent establishments. Treaties exist between the UK and many other fiscal jurisdictions to prevent the double taxation of profits. Use of these treaties, even where they result in a lower tax rate, are not considered to be abuse, and GAAR is not applicable in these circumstances. This could be the position with the Hammersmith group. Equally, Hammersmith may do business in genuinely low tax countries, or are making us of generous tax exemptions, including the use of losses, which do not amount to tax avoidance. If, however, arrangements exist which are specifically designed to exploit any tax beneficial provision of a treaty, then the GAAR can be used to counteract the abusive arrangements. Application to the Hammersmith group acquisition The transactions undertaken by the Hammersmith group may have resulted in a tax advantage, and although it is not clear if that is the main purpose of any transactions, it would be prudent to consider them in the context of GAAR, noting that the GAAR only applies to transactions entered into on or after 17 July Further details of the arrangement are needed and these should be available during the due diligence process. Petersfield Enterprises plc should take the opportunity to assess whether any transactions entered into by any of the companies within the Hammersmith group could be deemed to be abusive by HMRC for any accounting periods in which the enquiry window is still open. Should the acquisition go ahead, the Sale and Purchase Agreement should address these issues under the tax warranties, and any potential additional tax liability should be covered by the tax indemnity.

11 MARKING GUIDE TOPIC MARKS Opening comments, background, taxes effected Explanation of GAAR Purpose Tax Advantage Meaning of Arrangement Abusive and examples 1.5 Double reasonableness Self assessment No clearance GAAR invoked procedure HMRC enquiry HMRC officer notifies; reasons; counteraction Advisory panel Consequential adjustment Apply to Tribunal 1.5 Payment Accelerated Payment notices Multinational aspect Double tax treaties Conclusion Tax advantage /main reason Due diligence providing more information Commencment date Sale & Purchase Agreement warranties and indemnities TOTAL 15

12 Answer 4 Memo To: Michael Robins From: Tax Manager Subject Corporation Tax consequences of property and plant disposals Thank you for the information you recently provided to me. I have calculated that the gain potentially chargeable to Corporation Tax in the year ended 31 December 2017 relating to the sale of the building is 3,044,350 (see Appendix A). However, it is possible that this gain can be covered by the use of reliefs, as explained below. Calculation of chargeable gain Indexation Allowance is given on the cost of purchasing the building and on the incidental costs of purchase but not on the incidental costs of disposal, such as the consultant s fees. The deferred consideration contingent upon the application for, and the grant of, planning permission is taxable upfront, as the amount to be received is known (an ascertainable sum). Hence, despite these amounts being receivable in future years, they will form part of the chargeable gain calculation for The further consideration which could be received if the building is sold on to a gym operator is both contingent because it is depends on the development and the onward sale - and is unascertainable - because the amount payable is based on a possible future value which is unknown. However, the right to receive that consideration does have a value, which you have indicated to be 70,000, and this right is known as a chose in action. That value should be brought into the gain calculation and essentially taxed in You should be aware that HMRC may wish to examine the basis upon which you valued the chose in action. If the building is redeveloped and sold to the gym operators for more than 12 million, the company will receive a further sum. In the year of receipt, a further chargeable gain should be calculated as follows: Consideration X Cost (i.e. value at December 2017) (70,000) Indexation from December 2017 to date (X) of receipt of further payment Gain chargeable X Should the planning permission not be applied for or granted, or the onward sale not be achieved, no further consideration would be received by the company. As Corporation Tax will have been paid on the basis that these amounts are receivable, a claim can be made to HMRC to revise the original assessments and obtain a refund of any Corporation Tax overpaid. Should the contingent consideration be receivable over a period exceeding 18 months, an application to pay the tax relating to these receipts in instalments can be made. Plant and Machinery In the year a balancing allowance of 25,000 will arise on the sale of the plant and machinery (total allowances given being of 825,000). Although it is sold at a loss this will be reduced by the net allowances given (including any balancing losses/allowances). This will result in an overall no gain/no loss position. Possible mitigation of the gain arising on the sale of the building Capital Losses It is possible to utilise capital losses within a chargeable gains group. This is defined as a principal company and its 75% subsidiaries, and their 75% subsidiaries; but every subsidiary must be an effective 51% subsidiary of the principal company. The Ramcourt group meets this definition, assuming that other conditions for ownership, such as the right to profits for

13 assets on a winding up, are met. It is possible to elect to have the gains or losses allocated from one group company to another (or part of a gain/loss). Therefore, the gain on the sale of the building can be elected to be transferred to Court Manufacturing Ltd and RM Machines Ltd and offset by the brought forward losses in those companies The losses in Courtpackage Ltd are pre entry losses, i.e. capital losses that arose in Courtpackage Ltd before it joined the Ramcourt group. Legislation exists to restrict the use of pre-entry capital losses such that they can only be used against gains arising on assets which Courtpackage Ltd owned prior to acquisition by the Ramcourt group or against assets bought from third parties, so the capital losses brought forward in Courtpackage Ltd cannot be used against the gain on the sale of the building. Re-investment Rollover relief for the gain is available if the disposal proceeds are invested in new assets. The gain can be rolled over into replacement assets that are bought within one year before and three years after the sale of the building. The purchase of the new warehouse and fixed plant and machinery should qualify, assuming that the P&M become part of the building. A claim needs to be made within four years of the accounting period in which the gain is made, or the replacement asset is purchased (whichever is the latest) but a provisional claim can be made first. If the replacement asset is a wasting asset (i.e. has a life of 60 years or less) the gain is not rolled over but merely deferred until the replacement asset is sold or 10 years after the replacement if earlier. The gain then crystallises. (This could be the case with the Plant and machinery if not fixed) If the full disposal proceeds are not reinvested, a gain will still arise on the disposal of the building, being the lower of: i. The gain on the disposal of the building; and ii. The amount not reinvested. This calculation is shown at Appendix B. Conclusion At present there is insufficient reinvestment to reduce the gain arising. However, the gain can be fully offset by capital losses in Court Manufacturing Ltd and RM Machines Ltd. Regards Tax Manager

14 Appendix A Calculation of chargeable gain before reliefs Consideration - Received 31 December ,000,000 - When planning permission applied for 500,000 - When planning permission granted 1,500,000 Current value of future contingent consideration 70,000 Less incidental costs -Planning consultant (12,000) (no indexation) 6,058,000 Allowable costs - Cost of building 1,750,000 - Professional fees 7,500 - Stamp duty 52,500 Total purchase (1,810,000) Indexation allowance (1,203,650) RD-RI x 1,810,000 RI Chargeable gain 3,044,350 Appendix B calculation of rollover relief and capital loss offset Amount not reinvested Disposal proceeds (less expenses) 5,988,000 Reinvestment in warehouse (3,500,000) Reinvestment in fixed plant and machinery (500,000) Amount not reinvested 1,988,000 Gain arising Lower of Gain on disposal of the building 3,044,350 OR Amount not reinvested 1,988,000 Gain Offset by losses Gain not rolled over 1,988,000 Less losses in group ( 1,988,000) Gain chargeable to Corporation Tax NIL

15 MARKING GUIDE TOPIC Calculation of gain and explanation Consideration inc. contingent Base cost Indexation s.48 revision of calculation if not received s.280 instalments Plant and Machinery MARKS Consideration for onward sale Contingent and unascertainable taxed now Chose in action /valuation agree with HMRC Future calculation on receipt of payment Mitigation Capital losses - definition of a group - s 171A group election Pre entry losses - identify - use Rollover relief -replacement period; reinvest proceeds -rollover reduces base cost - claim period and provisional claim - depreciating asset gain deferred & crystallises - Partial rollover & calculation - Conclusion Presentation and higher skills TOTAL 20

16 Answer 5 Paul Smith Group Tax Director Jupiter plc [Address] [Name] Complex Tax Solutions LLP [Address] X November 2017 Dear Paul Corporation Tax implications of proposed transaction At our recent meeting, you outlined three potential ways that Venus LLC may be classified for tax purposes by HM Revenue & Customs ( HMRC ); the tax implications will depend on the classification. a) Body corporate with issued share capital: It is possible that the transfer of the shares by Jupiter plc of Venus LLC in exchange for the issue of ordinary shares by Mercury BV will be exempt from tax by virtue of the Substantial Shareholdings Exemption ( SSE ). SSE applies automatically where the following conditions are satisfied: 1) The shares being disposed of qualify as ordinary share capital this condition should be satisfied; 2) Greater than 10% of the shares are disposed of this condition should be satisfied; 3) The shares have been owned continuously for a period of 12 months out of the previous 24 months this condition should be satisfied; 4) The investor company (Jupiter plc) meets the definition of a trading company or a member of a trading group; and 5) The investee company (Venus LLC) qualifies as a trading company or a holding company of a trading group or subgroup. The investee company should qualify as a trading company as Venus LLC will have traded in the 12-month period up to the proposed date of disposal and is expected to be trading immediately thereafter. As Jupiter plc is the parent of the group, it is necessary to consider the trading activity of the wider group. HMRC has published guidance on the interpretation of substantial stating that in excess of 80% of the revenue, asset base and employees of the SSE group should relate to trading activity. It is unclear whether this requirement is met in view of the investment property portfolio owned by Pluto GmbH. Half of the trading activity of the joint venture company is treated as arising in Pluto GmbH for the purposes of this analysis. In summary, there is insufficient information to conclude on whether SSE will apply to the disposal and this should be further reviewed. If SSE does not apply to the disposal, it may still qualify as a tax-free reorganisation provided that it meets the following conditions. 1) The new shares issued by Mercury BV are in proportion to the shares previously issued by Venus LLC; 2) Mercury BV will hold in excess of 25% of the shares of Venus LLC; and 3) The transaction must be effected for bona fide commercial reasons and not form part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoidance of liability to Corporation Tax.

17 In the event that all conditions are satisfied, Jupiter plc will not be regarded as making a disposal of the shares in Venus LLC and acquiring a new shareholding in Mercury BV. Instead, the application of share for share relief means that the original shares in Venus LLC and the new shareholding in Mercury BV are treated as the same asset for Jupiter plc as acquired when the original shares in Venus LLC were acquired. As a consequence, any chargeable gain inherent in the shares of Venus LLC is effectively rolled into the new shareholding in Mercury BV. It seems likely that that these provisions would apply and therefore the transfer of the shares in Venus LLC by Jupiter plc to Mercury BV should not be treated as a chargeable disposal, rather the transaction should instead qualify as a tax free reorganisation on the basis that the corporate reorganisation is required in order to enable Mercury BV to raise external finance. b) Body corporate without issued share capital: In this scenario, the disposal will not qualify for SSE or as a tax free reorganisation due to Venus LLC not having ordinary share capital resulting in a taxable disposal. A chargeable gain or loss will arise based on the difference between the fair market value of Venus LLC (assumed to be 60 million) less the amount of capital invested in the company. c) Overseas branch of Jupiter plc The sale of assets by Jupiter plc is a taxable transaction and it will be necessary to distinguish between different classes of asset ordinarily being those falling in the chargeable gains rules, loan relationships and derivative contracts, intangibles assets and assets qualifying for capital allowances. Taxable gains and losses will broadly arise based on the difference between the fair market value of the assets at disposal and Jupiter plc s base cost for tax purposes in the assets. It should be possible, however, to claim holdover relief as the US branch is transferred to a non- UK company provided: The consideration for the transfer is wholly securities; and Jupiter plc owns more than 25% or the ordinary shares of Mercury BV. This relief represents a deferral of any chargeable gains with gains crystallising on a subsequent disposal of shares in Mercury BV or any disposal of interests in the LLC by Mercury BV in the next six years. Other considerations In scenarios (a) and (b) there is a risk of a tax charge arising on the transaction subject to further analysis. In view of this, you may consider having Earth XL Ltd acquire the interest in Venus LLC such that the no gain / no loss provisions can apply to prevent a chargeable gain arising. Similar provisions would also apply to prevent any clawback capital allowances or relief in respect of intangible assets. Please contact me if you have any queries. Yours sincerely [Name]

18 MARKING GUIDE TOPIC MARKS Transfer of Venus LLC to Mercury BV: Body corporate with issued share capital: Note that any chargeable gain or loss will be exempt if the Substantial Shareholdings Exemptions applies to the disposal Outline the conditions to be met in order for SSE to apply 2.5 State that Venus LLC should meet the investee company requirement Note that necessary to review the trading status of the wider group to determine whether Jupiter plc meets the investor company requirement State that investment property portfolio is a tainted asset Note that 50% of the trading activity in Saturn Ltd may be deemed to arise in Pluto GmbH Conclude that there is a risk SSE may not apply and further analysis to be undertaken Note that s.135 TCGA 1992 may apply to share for share exchange and 2.5 state relevant conditions Comment that relief likely applicable in view of rationale for transaction 1 Body corporate without issued share capital: State that SSE and s.135 TCGA 1992 cannot apply to transaction as no 1 issued ordinary share capital Note that taxable transaction and outline how any gains or loss to be 1 computed Overseas branch of Jupiter plc: Note that taxable transaction and outline how any gains or loss to be 2 computed Note that s.140 TCGA 1992 may apply and relevant conditions 1 State conditions under which held over gain crystallize after claiming relief 2 under s.140 TCGA 1992 Other considerations: Note that a transfer to Earth XL Ltd could be preferable in view of relief under 2 s.171 TCGA 1992, s.941 CTA 2010 and s.775 CTA 2009 Presentation and higher skills 2 TOTAL 20

19 Answer 6 To: Chris.Wallace@omnicorp.co.uk From: SeniorTaxAdviser@whitecross.accountants.com Date: X November 2017 Subject: Omnicorp plc UK Tax losses Dear Chris, It was good to meet with you recently and I set out below key considerations regarding how tax losses may be relieved during the year ended 30 September Cross-border group relief OmFraud Ltd may claim group relief from OS Sarl as a resident of an EEA member state provided certain conditions are satisfied. The loss needs to be recomputed applying UK tax principles and as OS Sarl would be regarded as having ceased trading on 1 January 2017; the maximum group relief available for surrender would be restricted to 7.5 million. OmFraud Ltd must conclude that no tax relief can be claimed overseas for the loss either now or in the future (which seems likely given the cessation of operations). Loss relief will be denied where obtaining tax relief for the loss is a main purpose to ceasing business, which should not be the case. Terminal loss relief TeleIndex Ltd can elect to carry back the 50 million trading loss against taxable profits arising in the 36 months prior to 30 June This is better than surrendering the loss by group relief because due to restrictions in the amount of losses that may be surrendered in view of overlapping accounting periods. Such claim would extinguish all of the profits for the year ended 30 September 2016 and would require TeleIndex Ltd to withdraw the 15 million group relief claim submitted in the year ended 30 September 2015 in order to offset the remaining unrelieved loss. The deadline for withdrawal of the group relief claim was 30 September 2017 but HMRC have some discretion to extend this time limit in circumstances such as this. As a consequence of withdrawing the group relief claim, Omnicorp plc will have an additional 15 million of tax losses to carry forward for offset in future accounting periods. Loss refresher provisions Legislation exists to counteract situations where groups undertake artificial transactions to effectively convert brought forward tax losses into current year tax losses that are far more versatile in nature. If applicable, tax relief for brought forward losses is prohibited against such income. These rules are relevant to the know-how transferred by TeleSales Ltd to Omnicorp plc. This transaction may result in royalty income being sheltered by brought forward losses of Omnicorp plc with a current year deduction for Telesales Ltd. The brought forward losses of Omnicorp plc may not offset the royalty income where the loss refresher provisions apply.

20 The rationale for the transaction is unclear and you will need to demonstrate that the main purpose, or one of the main purposes of the arrangement was not to obtain a tax advantage and that the tax value of such advantage does not exceed the non-tax value to avoid loss relief being denied in Omnicorp plc. Kind regards, [Name] Senior Tax Adviser Whitecross Accountants LLP MARKING GUIDE TOPIC MARKS Group relief: Note that OmFraud Ltd may claim group relief from OS Sarl as a company resident in an EEA member state provide certain conditions are met State that loss must be computed applying UK tax principles Comment on overlapping period and reduced group relief of 7.5 million 1 State obligation of OmFraud Ltd to determine no tax relief may be claimed 1 overseas for the loss Concluded that obtaining loss relief should not be a main purpose associated 1 with the claim Terminal loss relief: Comment that TeleIndex Ltd may make a terminal loss relief claim under 1 s37(3)(b) CTA 2010 and the time limit for carrying a loss back States why loss carry back claim optimal to surrendering group relief Note that additional loss relief can be claimed where prior group relief claim 1 Refer to time limit for withdrawal and HMRC discretion to extend this 1 Loss refresher provisions: State function of loss refresher provisions in Part 14B, CTA Comment that loss refresher provisions may apply following transfer of the 1 know-how from TeleSales Ltd to Omnicorp plc Note that insufficient information available to conclude whether transaction has a main purposes of securing a tax advantage TOTAL 10