FAE September 2012

murphs53

Eiriu wrote: »

But if one takes away the trade the company has no value?


The legislation specifically refers to the value of the shares- what does this derive from?

Also the legislation specifically refers to land- are land and buildings viewed as the same thing - because the land was worthless without the building.


Company - trade +building = -300,000 when you consider employee termination costs and other costs on liquidation. share value therefore 0.

Company +trade -building =0

Company + trade+building = 700,000 the company offered money for the company not the building.

The shares are worthless without either building or trade. If shares are worthless without trade then how can one argue that the majority of their value comes from building.


Judges are allowed interpret legislation in equitable fashion so who knows what way it might be viewed in court.

I think it's interesting that institute said- no development potential.

Given the nature of Mandalay it would hardly be viewed by revenue commissioners as a scheme to avoid cgt by the group by holding its property assets in a separate company. Which I think is the spirit of the legislation. No of employees years trading ect.

But Thomas if you've more experience in this field please let me know, I could be arguing with an expert.

I still think it would be possible to get RC or maybe C in the question by calculating the Cgt and mentioning the other standard stuff on asset/share sale even if wrong about participation exemption. The share sale still was the way to go.

I would love to hear the institutes views on this.

Haven't seen the exam, but there is a difference between land and buildings. S626b not applying is only relevant if the company derives a greater part of its value from land, not buildings

Eiriu

murphs53 wrote: »

Haven't seen the exam, but there is a difference between land and buildings. S626b not applying is only relevant if the company derives a greater part of its value from land, not buildings

That's great, looks like participation exemption applies so. We were told land had no development potential on exam paper.

So difficult to argue that the majority of companies share value derived from land in the state.

Hence participation exemption applies?

Any further thoughts on this?

shery

Eiriu wrote: »

That's great, looks like participation exemption applies so. We were told land had no development potential on exam paper.

So difficult to argue that the majority of companies share value derived from land in the state.

Hence participation exemption applies?

Any further thoughts on this?

Would you be in serious trouble if you didnt make much calculation and suggested to go with share sale, applied participation exemption (assuming it applied), mentioned double tax charge on asset sale, applied generic benefits of share vs asset sale?

I completely missed out on indicator in SIM 3.

Thomas the Tax Agent

Eiriu wrote: »

murphs53 wrote: »

Haven't seen the exam, but there is a difference between land and buildings. S626b not applying is only relevant if the company derives a greater part of its value from land, not buildings

That's great, looks like participation exemption applies so. We were told land had no development potential on exam paper.

So difficult to argue that the majority of companies share value derived from land in the state.

Hence participation exemption applies?

Any further thoughts on this?

"Land" for tax purposes means land and buildings.

The Schedule to the Interpretation Act 2005 (essentially a guide to interpreting TCA 1997) defines "land" for tax purposes as including "tenements, heriditaments, houses and BUILDINGS, land covered by water and any estate, right or interest in or over land".

Land = Buildings

There's enough ambiguity around this though that a well argued answer saying that the participation exemption applies HAS to be "Reaching Competent". Just saying that the exemption applies probably won't be enough though because it definitely doesn't.

Eiriu

Thomas the Tax Agent wrote: »

"Land" for tax purposes means land and buildings.

The Schedule to the Interpretation Act 2005 (essentially a guide to interpreting TCA 1997) defines "land" for tax purposes as including "tenements, heriditaments, houses and BUILDINGS, land covered by water and any estate, right or interest in or over land".

Land = Buildings

There's enough ambiguity around this though that a well argued answer saying that the participation exemption applies HAS to be "Reaching Competent". Just saying that the exemption applies probably won't be enough though because it definitely doesn't.

What was the gain on the sale of shares something like 450,000 so CGT of
112,500 would therefore apply.

It would still have made the share sale a better option.

If one calculated the CGT on building, share sale and got these right.but said participation exemption applied.

and Mentioned vat on selling equipment, calculated appropriate rates of stamp duty
giving of guarantees ect- would this be enough to get competent?-one should hope so- the ambiguity surrounding this is unacceptable.

Also it said that company was loss making in previous years. Since they were in a loss making group were we to assume these had been grouped in these past years- or if they had not been, were they available to carry forward? Is'nt it more likely that these would have been grouped in the year which they occurred as the saving today is worth more than the same saving in the following year.

I said the groups effective rate of tax would increase due to loss of loss making company- is this valid?

There was surely enough other information in this indicator apart from the participation exemption to reach competent. The participation exemption only amounted to 112,500 in extra tax which was not material to the question or the choice needed to be made.

This exert below comes from the Revenues own website.

Section 626B TCA 1997 provides an exemption from tax for certain capital gains arising on the disposal by a company of holdings in trading subsidiaries (investee companies). This exemption was introduced by Section 42 Finance Act 2004 and applies to disposals on or after 2 February 2004.

"A condition of the relief is that, at the time of disposal of the shares, the business of the investee company or, in the case of a group, the business of the group taken together must consist wholly or mainly of the carrying on of a trade or trades.

For the purposes of Section 626B, 'wholly or mainly' means greater than 50%. The primary tests are the proportion of net trading profits and the proportion of net trading assets, though other factors may be taken into account. These lesser considerations would include trading turnover as a proportion of gross receipts and the proportion of employees’ time devoted to trading and non-trading activities.

In considering the test in the context of Section 626B(2)(c)(ii), intra-group transactions are excluded.

Looks like the revenue apply the % of net trading assets- the wording is designed to prevent 626b being used on gains for development land.

I don't think land means land and buildings in the context of 626B- This was a trading company

Thomas the Tax Agent

You're mixing things up. The trading test and this "land and buildings" point are separate issues.

From the Irish Tax Institute's "Taxation Summary" book:

"The shares must not derive the greater part of their value from Irish land or buildings"

Whether the land or buildings are used for trading purposes or not is completely irrelevant. It's a straightforward condition: The shares must not derive the greater part of their value from Irish land or buildings. This company's value (€700k) is almost 100% derived from a building in Ireland. The value of the building (€21m) and the equity in the building (€3m) dwarf everything else on the company's balance sheet. And we're not told whether the debt even relates to the building, so the €3m figure may not even be relevant, but even if it is it dwarfs everything else the company has.

Eiriu

Thomas the Tax Agent wrote: »

You're mixing things up. The trading test and this "land and buildings" point are separate issues.

From the Irish Tax Institute's "Taxation Summary" book:

"The shares must not derive the greater part of their value from Irish land or buildings"

Whether the land or buildings are used for trading purposes or not is completely irrelevant. It's a straightforward condition: The shares must not derive the greater part of their value from Irish land or buildings. This company's value (€700k) is almost 100% derived from a building in Ireland. The value of the building (€21m) and the equity in the building (€3m) dwarf everything else on the company's balance sheet. And we're not told whether the debt even relates to the building, so the €3m figure may not even be relevant, but even if it is it dwarfs everything else the company has.

if one said the participation exemption applied would it be impossible to be reaching competent in this indicator? There was a lot of other things that needed to be mentioned in relation to tax.

What is your background Thomas are you from the institute /practice or did you sit the FAE s

Thomas the Tax Agent

I don't think that this participation exemption thing will be fatal either way. Like you say, there was enough other stuff there.

I am an AITI qualified tax consultant working in industry. I sat the FAEs last week (as an Elevation student).

I sailed through the tax elective but I'm concerned re Core. The bullsh1tty nature of the papers (Change Management, Marketing, etc), the lack of gritty technical stuff and the lack of tax indicators (max two) were an issue for me. Time will tell.

ferike1

Yeah I've heard of someone passing tax elective and failing core on tax. sucky!

Eiriu

ferike1 wrote: »

Yeah I've heard of someone passing tax elective and failing core on tax. sucky!

I'm glad I got the indicator about the self correction. I don't think there was enough tax on paper. Very unfair given the amount of time people spent on it. And for one of them to be hidden!

Pawwed Rig

It seems to be games from the person devising the case studies to see how clever he can be. Last year one of the tax indicators was missed by lots of people too. I am not sure what hiding indicators achieves. Surely it would be better to allow the student to show off their knowledge rather than spend time second guessing what they are answering

ferike1

Or making the indicators really ambiguous like the financial and non financial implications. Is that financial reporting implications or finance or both? I keep bringing it up because I thought it was very poorly worded. Like that could be cleared up with a few words. Throw in the word reporting or not reporting or all financial and non-financial (including reporting) etc.

Flange/Flanders

Or just go back to a fair system where you have specific questions and you know what subject is being tested with a clear marking system!

Anyone that asks me, Im def gonna advise them to do ACCA

Moorstown

Eiriu wrote: »

I'm glad I got the indicator about the self correction. I don't think there was enough tax on paper. Very unfair given the amount of time people spent on it. And for one of them to be hidden!

I too went with the Participation Exemption. Would it of been ok if you mentioned that a Unprompted Qualifying Disclosure was required in relation to the Paye/Prsi instead of Self Correction. That's what I said?

upnorthchick

Any word when the Cassi report will be out? i know it had to be with the institute this week sometime. thanks guys

PatACA

will go easy...:)

ferike1

Pat your messages are more cryptic than the indicators on the exam.

PatACA

ferike1 wrote: »

Pat your messages are more cryptic than the indicators on the exam.

Will go easy on the marking

ferike1

How do you know?

lala1987

is it too late to apply for exemptions with ACCA? what is cost? im mid application but have to get to end to see actual cost and i havent uploaded my full info!! any help appreciated!

ferike1

Standard application ends 8th of October.

Late registration is 8th of November.

whytenc

lala1987 wrote: »

is it too late to apply for exemptions with ACCA? what is cost? im mid application but have to get to end to see actual cost and i havent uploaded my full info!! any help appreciated!

did you manage to figure out the total cost yet? tempted to register for one or two in December just in case

lar05

where did people make complaints about the exams to?

Pawwed Rig

There was a feedback through CASSI and some of the firms collected their own feedback which they will presumably forward onto the Institute. I am sure you could write a letter yourself if you felt strongly about something. What is your issue exactly if you would like to post here?

notanocelot

CASSI reports are usually out a week or so after the exams. Anyone have an idea what's causing the difference this time round?

pepp

notanocelot wrote: »

CASSI reports are usually out a week or so after the exams. Anyone have an idea what's causing the difference this time round?

I was wondering this myself it's a bit strange

Szewinska

are they not out now. i saw them at least a week ago

Eiriu

Szewinska wrote: »

are they not out now. i saw them at least a week ago

Where can you see them?

pepp

Szewinska wrote: »

are they not out now. i saw them at least a week ago

I checked on the cassi website all last week and no sign of report where did you see it?

upnorthchick

I emailed about it to cassi - it was to be finalised over the weekend and should be available for download this week. Apparently an email will be sent to us all.