Part 2 of 4
This is the Finance Act 2017 version of this article. It is relevant for candidates sitting the Advanced Taxation – United Kingdom (ATX-UK) (P6) exam in the period 1 June 2018 to 31 March 2019. Candidates sitting ATX-UK (P6) after 31 March 2019 should refer to the Finance Act 2018 version of this article (to be published on the ACCA website in 2019).
From the September 2018 session, a new naming convention is being introduced for all of the exams in the ACCA Qualification, so from that session, the name of the exam will be Advanced Taxation – United Kingdom (ATX-UK). June 2018 is the first session of a new exam year for tax, when the exam name continues to be P6 Advanced Taxation (UK). Since this name change takes place during the validity of this article, ATX-UK (P6) has been used throughout.
In Part 1 GF Ltd (GFL) was formed and began trading. In this part, GF Ltd will acquire an additional business. Once you have read about the company’s plans, stop and think about the possible tax implications before reading on.
In February 2017 Fay identified TP Ltd, a member of a large group of companies, as a possible acquisition. It was agreed (for commercial reasons) that the trade and assets of TP Ltd, rather than the shares, would be acquired.
On 1 April 2017, GF Ltd formed WA Ltd (WAL), a wholly owned subsidiary. On the same day, WA Ltd acquired the trade and assets of TP Ltd. TP Ltd had trading losses of £65,000 and capital losses of £18,000 available to carry forward as at 31 March 2017.
The results of the two companies for the year ended 31 March 2018 were as follows.
GFL | Taxable total profits | £200,000 | |
WAL | Trading profits Chargeable gains | £80,000 £20,000 |
On 1 December 2017 GF Ltd made a loan of £14,000 to Lamar, one of the passive investors in the company.
The tax implications arising out of this expansion via acquisition are:
In the remaining parts of this article we will look at the implications of GF Ltd expanding overseas.
The corporation tax issues relating to groups are considered in two further articles:
Written by a member of the ATX-UK (P6) examining team
The comments in this article do not amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content of this article as the basis of any decision. The authors and ACCA expressly disclaim all liability to any person in respect of any indirect, incidental, consequential or other damages relating to the use of this article.