FAE 2011 Where to begin

Rickyroma

mgsrocks wrote: »

There's a few things coming into play. For the accounting treatment (assuming the nbv is mv of €500k):
Dr Bank €200k
Dr Loss on Disposal (Income statement): €300
Cr: Property €500

Then there's tax. Company pays CGT @25% on the market value if sold to a related party or no cgt to a subsidiary (75% rule). The other party will pay CAT 300k (the gift part) and deduct CAT relief and gift exemption. If its a director or shareholder they don't pay CAT but its treated as a distribution so DWT for company at 20% and then taxed at marginal rate for individual.

Stamp duty @6% and no VAT if vat registered.

Finally the base cost of the shares will be reduced by €300k for future disposal of those shares.

I'm willing to be corrected on anything, just hope it would be enough to get competent!

Only thing I'd add is Stamp duty relief if to a > 90% susidiary under Section 79 SDCA, 2 year clawback if subsid leaves the group.

RidiculousHair

mgsrocks wrote: »

There's a few things coming into play. For the accounting treatment (assuming the nbv is mv of €500k):
Dr Bank €200k
Dr Loss on Disposal (Income statement): €300
Cr: Property €500

Then there's tax. Company pays CGT @25% on the market value if sold to a related party or no cgt to a subsidiary (75% rule). The other party will pay CAT 300k (the gift part) and deduct CAT relief and gift exemption. If its a director or shareholder they don't pay CAT but its treated as a distribution so DWT for company at 20% and then taxed at marginal rate for individual.

Stamp duty @6% and no VAT if vat registered.

Finally the base cost of the shares will be reduced by €300k for future disposal of those shares.

I'm willing to be corrected on anything, just hope it would be enough to get competent!

Only thing i'd add would be company only pays cgt on dev land, on any other disposals, it pays corporation tax on the chargeable gain, which is effectively the same amount, but does impact on payment dates for preliminary tax and the balance of tax due.

Also, VAT would apply on the transfer if between VAT reg persons, unless VAT grouped in advance of transfer. This is not like your usual CGT group relief, VAT grouping requires a formal application to Revenue, or alternatively, Revenue can choose to impose it if they wish.

Vaioer

Anyone got Natureflame and Overcoatings? I noted them on someone elses index there, but I can't see them anywhere on my portal.

flapps

[QUOTE=There's a few things coming into play. For the accounting treatment (assuming the nbv is mv of €500k):
Dr Bank €200k
Dr Loss on Disposal (Income statement): €300
Cr: Property €500

Then there's tax. Company pays CGT @25% on the market value if sold to a related party or no cgt to a subsidiary (75% rule). The other party will pay CAT 300k (the gift part) and deduct CAT relief and gift exemption. If its a director or shareholder they don't pay CAT but its treated as a distribution so DWT for company at 20% and then taxed at marginal rate for individual.

Stamp duty @6% and no VAT if vat registered.

Finally the base cost of the shares will be reduced by €300k for future disposal of those shares.

I'm willing to be corrected on anything, just hope it would be enough to get competent!

Rickyroma;74010337]Only thing I'd add is Stamp duty relief if to a > 90% susidiary under Section 79 SDCA, 2 year clawback if subsid leaves the group.[/QUOTE]

Cheers, much appreciated..

So there's no law that forbids a sale of assets at below market value then? Surely there's something like 'the sale must be at arm's length'..

If there's only tax implications:

If Cost = Market Value of Property = €1m

Company sells asset to Director's son for €100K.

Company takes loss of €900K to P&L and no CGT as no gain/loss.

Son now has property worth €1m.

stamp duty of €60,000 due & CAT of (900K - 414,799) @ 25% = €121,300.

Seems like a good deal to me so i must be missing something..

Directors loan created in parents company of €900K ?? with €225K tax paid to revenue?? Is that what makes it a crappy deal..

But if it was sold to a company, then no CAT only stamp duty of €60K. (ignoring stamp duty reliefs)

Going round in circles here, think i'm losing my mind..

RidiculousHair

flapps wrote: »

Cheers, much appreciated..

So there's no law that forbids a sale of assets at below market value then?

So if Cost = Market Value of Property = €1m

Company sells asset to Director's son for €100K.

Company takes loss of €900K to P&L and no CGT as no gain/loss.

Son now has property worth €1m.

stamp duty of €60,000 due & CAT of (900K - 414,799) @ 25% = €121,300.

Seems like a good deal to me so i must be missing something..

Directors loan created in parents company of €900K ?? with €225K tax paid to revenue?? Is that what makes it a crappy deal..

Going round in circles here, think i'm losing my mind..

From the info you've provided, my read of the tax issues would be:

Company pays CT on the gain @ 25% (no gain/no loss only applies between companies, not company to person)
Son pays stamp duty at 6%
Company charges VAT on supply at 21%
Son withhold possible CGT WHT at 15% on consideration, though should be able to get CG50 in advance
Son will not have a CAT charge as the transfer will be a deemed distribution under close co rules, so DWT etc will apply as mentioned before i think.

From an accounting point of view, not sure this would appear as a director's loan on the balance sheet as a loan would suggest that you will be effectively be paying the full mkt consideration for the asset, though the accounting bit wouldn't be my strongest point...

RidiculousHair

The one thing i'll have taken from this whole process, is that after being on the jaffa cake diet for many weeks now, jacob's jaffa cakes are most definately the best jaffa cake out there at the moment...

mgsrocks

flapps wrote: »

Cheers, much appreciated..

So there's no law that forbids a sale of assets at below market value then?

So if Cost = Market Value of Property = €1m

Company sells asset to Director's son for €100K.

Company takes loss of €900K to P&L and no CGT as no gain/loss.

Son now has property worth €1m.

stamp duty of €60,000 due & CAT of (900K - 414,799) @ 25% = €121,300.

Seems like a good deal to me so i must be missing something..

Directors loan created in parents company of €900K ?? with €225K tax paid to revenue?? Is that what makes it a crappy deal..

Going round in circles here, think i'm losing my mind..

Correct on the 900k loss to income statement. The son would be deemed a related party and so the company pays CT ('CGT') on the market value (1m @25% - see RidiculousHair comment on why this is CT and not CGT).

Next, the transaction was between the company and son NOT the director and his son so its a group C transaction for CAT not group A. Don't forget gift exemption for an additional €3000 deduction.

Lastly, the €900k loss is then deducted from the base cost of future disposals of shares. This gets allocated between all shareholders as far as I know, so if there's 2 shareholders with a 60%-40% stake then one has the base cost reduced by €540k and the other €260k.

Don't forget the related party disclosure in the FS! I don't think it would count as a dividend to the director though as it went to his son who is not a shareholder.

If the above did happen it would seem like the director was trying to extract assets without paying DWT and revenue would probably have something to say about that!

RidiculousHair

mgsrocks wrote: »

Correct on the 900k loss to income statement. The son would be deemed a related party and so the company pays CT ('CGT') on the market value (1m @25% - see RidiculousHair comment on why this is CT and not CGT).

Next, the transaction was between the company and son NOT the director and his son so its a group C transaction for CAT not group A. Don't forget gift exemption for an additional €3000 deduction.

Lastly, the €900k loss is then deducted from the base cost of future disposals of shares. This gets allocated between all shareholders as far as I know, so if there's 2 shareholders with a 60%-40% stake then one has the base cost reduced by €540k and the other €260k.

Don't forget the related party disclosure in the FS! I don't think it would count as a dividend to the director though as it went to his son who is not a shareholder.

If the above did happen it would seem like the director was trying to extract assets without paying DWT and revenue would probably have something to say about that!

Re the CAT point, if the transfer is from company to son of director, then this is a distribution under close co rules, as the son is an associate of a participator (i.e. connected to a shareholder), no DWT rules apply, no CAT.

tbh, think this is being overdone a little, esp if it's only for the core.

flapps

mgsrocks wrote: »

Correct on the 900k loss to income statement. The son would be deemed a related party and so the company pays CT ('CGT') on the market value (1m @25% - see RidiculousHair comment on why this is CT and not CGT).

Next, the transaction was between the company and son NOT the director and his son so its a group C transaction for CAT not group A. Don't forget gift exemption for an additional €3000 deduction.

Lastly, the €900k loss is then deducted from the base cost of future disposals of shares. This gets allocated between all shareholders as far as I know, so if there's 2 shareholders with a 60%-40% stake then one has the base cost reduced by €540k and the other €260k.

Don't forget the related party disclosure in the FS! I don't think it would count as a dividend to the director though as it went to his son who is not a shareholder.

If the above did happen it would seem like the director was trying to extract assets without paying DWT and revenue would probably have something to say about that!

Thanks again for humoring me.. sorry for taking up the board..

No so sure bout the CGT(CT) @25%, considering it cost €1m and was sold for €1m (deemed proceeds). How is there a CGT(CT) liability if theres no chargeable gain?

I was suggesting the directors loan as a debtor with DWT on the 900K. It doesnt make sense that u can extract a 1m asset out of company for 100K and then the recipient of the asset pays the tax on it.

In the above example, (ignoring VAT as son could be a VAT reg sole trader).
His CAT liability is €219,815 (900K - 20,740) and SD is 60K..
So it's cost him €379,815 for a 1m asset?? (100K+219,815+60K)

The reduction on the base cost of shares surely wouldn't offset this difference?

ahtfulal

Guys will ye get a room no need for all dis complex talk on here ye mo fo's! Ha ha.

Any thoughts on business leadership?

limklass2011

strategy re acquistions anyway for the integration

Perennial Procrastinator

RidiculousHair wrote: »

The one thing i'll have taken from this whole process, is that after being on the jaffa cake diet for many weeks now, jacob's jaffa cakes are most definately the best jaffa cake out there at the moment...

Thats CAP1 stuff mate!:eek:

luco123

Thanks for all the posts on the directors loans, i think i get it now!!

Perkina3

luco123 wrote: »

Thanks for all the posts on the directors loans, i think i get it now!!

Good god man what you doing up at 5.55am!!!!

luco123

Perkina3 wrote: »

Good god man what you doing up at 5.55am!!!!

its woman! and the early bird catches the worm!;)

upnorthchick

any good management questions or cases anyone would suggest? have hardly looked at this area... thanks in advance... as for tax elective ni - i have give up!!!!!

pepp

upnorthchick wrote: »

as for tax elective ni - i have give up!!!!!

Same its a nightmare!! just can't wait for the agony to be over... untill November! :mad:



I've done a few of the cases in the text they are really detailed but better to do too much than not enough I think

upnorthchick

pepp wrote: »

Same its a nightmare!! just can't wait for the agony to be over... untill November! :mad:



I've done a few of the cases in the text they are really detailed but better to do too much than not enough I think

aww yea your right november will be depressing! and my contract is out end of Nov more the reason to get these!!!

aye i was thinking that - might spend a day doing management maybe over wknd... but so scared... still to sort a lot of files etc...

SL10

upnorthchick wrote: »

aye i was thinking that - might spend a day doing management maybe over wknd... but so scared... still to sort a lot of files etc...

I've done bolt, plastics and killyleagh after advice from people on here for management. Gonna do Stationery too today or tomorrow. Still feeling a bit like i haven't done enough for Management! Any other recommendations of cases to do? Do people think we need to know things like process costing etc?

upnorthchick

SL10 wrote: »

I've done bolt, plastics and killyleagh after advice from people on here for management. Gonna do Stationery too today or tomorrow. Still feeling a bit like i haven't done enough for Management! Any other recommendations of cases to do? Do people think we need to know things like process costing etc?

aww yea i remember bolt and killyleagh from cap 2 actually but think ill look at those. thanks
if any more i see ill get on and put them up for you..

thanks again

missapril

Hey,

I'm hoping someone can help and apologies in advance if the answer is glaringly obvious!

In the solution to Plastic Products, for the ABC system I'm struggling to understand where they got the activity levels from.
Bottom of p.269 in solutions book.

Would really appreciate if anyone can help on this one..:)

Vaioer

I asked the same question a few days ago.

There is literally no justification for it, they just "came up" with the figures for the absorption and ABC.

The Institute having stupid answer, who would have thought it....

RidiculousHair

anybody else done sweet f**k all today and just totally lacking any motivation at the moment?? in need of a bit of a pep talk right now to get my ass in gear!

1306

RidiculousHair wrote: »

anybody else done sweet f**k all today and just totally lacking any motivation at the moment?? in need of a bit of a pep talk right now to get my ass in gear!

Yup I'm in the same boat.. I feel like iv forgotten loads and am totally demotivated now!

the_big_dawg

For all those doing tax elective- Whats everyones thoughts on referencing the legislation? Referenced quite a bit in the past papers etc. but surely they can't be expecting us to go hunting for these in exam?

Thought I'd get the CCH red index book, which has been gathering dust from when I got them, but its a bloody nightmare.

Motivation at an all time low...
:mad:

Hackysack

the_big_dawg wrote: »

Motivation at an all time low...
:mad:

I swear I actually read that as 'Motorvation' at an all time low.

I think i'm losing it...

SL10

Hackysack wrote: »

I swear I actually read that as 'Motorvation' at an all time low.

I think i'm losing it...

I've become so obsessed with corporate governance that my first reaction to the news that Steve Jobs has stepped down as CEO of apple was that it was against the code for him to take the position of chairman!! I really need to get a life....

Hackysack

Mine as well!!!

eoferrall

SL10 wrote: »

I've become so obsessed with corporate governance that my first reaction to the news that Steve Jobs has stepped down as CEO of apple was that it was against the code for him to take the position of chairman!! I really need to get a life....

it was worse he held both positions at the same time! I looked into it upon reading it (its all study right?!) and since it's only listed in america and not LSE the combined code is not applicable. there doesn't seem to be the same requirements in USA markets.

Their policy is

The Board does not have a policy on whether or not the roles of Chairman of the Board and CEO should
be separate and, if they are to be separate, whether the Chairman of the Board should be selected from
the non-employee directors or be an employee of the Corporation. The Board believes these issues
should be considered as part of the Board’s broader succession planning process.

read their full Governance statement here

Moorstown

HEAD UP EVERYONE. This day week come 5:30 p.m we'll be FINISHED and we won't have to worry about them until November 18th. In relation to the tax elective, I would think if you can reference the legislation great but to be honest I wouldn't see it as a main factor in deciding your result. Anyway if you know the material, you'll more than likely be familiar with the legislation anyway. By the way what is this CCH red index book?