Part 2 of 4
This is the Finance Act 2021 version of this article. It is relevant for candidates sitting the ATX-UK exam in the period 1 June 2022 to 31 March 2023. Candidates sitting ATX-UK after 31 March 2023 should refer to the Finance Act 2022 version of this article (to be published on the ACCA website in 2023).
In Part 1 GF Ltd 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 2021 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 2021, GF Ltd formed WA Ltd, 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 2021.
The results of the two companies for the year ended 31 March 2022 were as follows.
|GFL||Taxable total profits||£200,000|
On 1 December 2021 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 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.