Business Law and Practice Flashcards

1
Q

When can dividends be declared and paid under model articles?

A

The model articles of association provide that the payment of a dividend must be recommended by the board of directors before it can be declared by the shareholders by an ordinary resolution.

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2
Q

Is it possible for the statutory notice period to hold a GM to be shortened?

A

Yes, but a majority in the number of shareholders who hold at least 90% of the shares must agree to the short notice.

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3
Q

A company issued 1,000 £1 ordinary shares and 2,000 £100 shares with a 5% noncumulative preference. The company approves distribution of a £100,000 dividend.

What is the maximum amount that may be distributed to the ordinary shareholders?

A

£90k

If a company has preference shares, the preference must be paid before any dividend may be distributed to the ordinary shareholders. Here, the company has 2,000 £100 shares with a 5% preference. That means that each of the 2,000 preference shares is entitled to receive 5% of £100 before the company may make a distribution to the ordinary shareholders. So, the first £10,000 (£5 x 2,000 shares) must be distributed to the preference share owners, which leaves £90,000 that may be distributed to the ordinary shareholders.

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4
Q

What is a de jure director?

A

A de jure director is a director properly appointed by law, having complied with all the necessary formalities required by the Companies Act 2006.

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5
Q

How can a company’s name be changed?

A

SR (75% or more in favour) of shareholders

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6
Q

What are the director/member requirements for a private limited company?

A

A private limited company is required by law to have a minimum of one director and one shareholder, but there is no legal requirement for a company secretary.

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7
Q

What is the statutory notice period required to be given to shareholders to call an annual general meeting?

A

The statutory notice period required to be given to shareholders to call an annual general meeting is 21 clear days, whether the resolutions to be considered are ordinary or special resolutions.

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8
Q

What is required for registration of a company?

A

On first registration, a memorandum of association is required to be filed. It contains a statement of the initial subscribers’ intent to form a company and that they agree to become members. Also required is the proposed name of the company, the location of the registered office, details of the company’s business activity and SIC (Standard Industrial Classification) code, whether the company will be limited by shares or guarantee, whether the company is private or public, a statement of share capital and initial shareholdings, a statement of the proposed directors (and company secretary, if applicable), details of persons with significant control (PSCs), a statement of compliance with the terms of the Companies Act 2006, and payment of the relevant fee.

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9
Q

Who has the power to allot more shares of a company?

A

The board of directors per Model Articles (provided unamended).

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10
Q

A company was incorporated several years ago and has adopted the Companies (Model Articles) Regulations 2008 (unamended) for private companies limited by shares as its articles of association. It now wishes to raise capital by issuing more shares.

Currently, the company has only two shareholders: Shareholder Able holds 600 ordinary shares, and Shareholder Baker holds 300 preference shares. No resolution has been passed to disapply pre-emption rights. The company wants to issue another 600 £1 ordinary shares at a £99 premium.

How many shares must be offered to each shareholder?

A

(D) Able must be offered all 600 shares. When a company allots ordinary shares after the initial allotment, existing ordinary shareholders have a right to purchase a portion of the shares to maintain their proportional ownership if the shares are to be issued for cash. This is called the preemption right. Here, the company is seeking to issue 600 new shares at £100 per share (£1 plus a £99 premium). Since Able is the only ordinary shareholder and Able holds 100% of the issued ordinary shares, Able must be offered 100% of the shares to be allotted. As Baker does not hold any ordinary shares, Baker would not have any pre-emption rights in the shares to be allotted. (A), (B), and (C) are incorrect because they offer a pre-emption right to Baker. (E) is incorrect because the fact that the company has more than one class of stock does not negate the pre-emption right of ordinary shareholders.

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11
Q

How can express actual authority arise?

A

ONLY MAJORITY REQUIRED NOT CONSENT OF ALL - Express actual authority can arise from an agreement of a majority of the partners. Express actual authority is the authority the partners expressly agree a partner has. Such authority can be granted in the partnership agreement or by any other agreement of the partners. Since most partnership decisions can be made by a majority vote, express actual authority may be granted by a vote of the majority.

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12
Q

What is required when forming a limited partnership?

A

Must make filing at Companies House

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13
Q

On 1 January 2021, Isaac sold a freehold property for £400,000 that he had acquired for £180,000. In the previous year, on 1 June 2020, Isaac bought a freehold property for £360,000. Both properties were used for trading purposes. Isaac is a higher rate taxpayer.

What is Isaac’s capital gain tax liability for tax year 2020/21?

A

£5,540
Due to a qualifying business asset being purchased within the requisite time period (1 January 2020 to 31 December 2024), replacement of business asset relief is available. As the sale proceeds have not been fully reinvested, some of the gain cannot be deferred (£400,000 − £360,000 = £40,000). After deducting the annual exemption (£40,000 − £12,300 = £27,700), CGT will be payable at 20% as Isaac is a HRTP. Entrepreneur’s relief is not available on the disposal of an asset in isolation.

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14
Q

when does personal allowance get tapered?

A

Income over £100k

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15
Q

A VAT-registered engineer agreed to do some work for a client on a flat fee scheme. The client paid the engineer the orally agreed amount on 10 April, and the engineer sent an invoice to the client on 15 April.

The engineer commenced working on 1 June and concluded his work on 31 August.

What is the tax point for VAT purposes?

A

10th April
In cases where the payment is made and the invoice is issued before the good or service is supplied, the tax point is the earlier of the payment or invoice date which, here, is 10 April

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16
Q

A mechanic operating as a sole trader has approached his solicitor seeking advice as to how much he will be required to pay when his first payment on account falls due for 2023/24. His income tax payable for 2022/23 was £48,000 and for 2023/24 £56,500.

What amount should the solicitor tell the client?

A

£24,000. Payments on account are always calculated using 50% of the prior year’s income tax payable figure. So, for 2023/24, the payments on account will be calculated using 50% of 2022/23 income tax payable. 50% of £48,000 = £24,000.

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17
Q
A

£26,250. The electrician has total income of £105,000 (trade profits plus dividend income). From that amount, qualifying loan interest relief will be given for the £3,500 interest paid on the loan taken out to pay the IHT liability. This leaves the electrician with net income of £101,500. This is above the £100,000 threshold, so the £12,500 personal allowance needs to be tapered £1 for every £2 of income above £100,000. So, the personal allowance will be reduced by £750 to £11,750. The personal allowance will be deducted from the non-savings income (trade profits - interest on the qualifying loan), leaving £69,750 taxable. The first £37,500 will be at the basic rate of 20%, the remainder at the higher rate of 40%. £2,000 of the dividends are covered by the dividend allowance, leaving the remaining £18,000 to be taxed at the higher rate for dividends of 32.5%.

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18
Q

A sole trader has incurred the following expenses in a year in which the annual investment allowance was £200,000:

  • Motor expenses costing £450 for her car that she uses 70% for business
  • £4,000 electricity and gas used by the business
  • Legal fees of £850 in respect of the acquisition of the business premises
  • £1,500 for the acquisition of a laptop to be used within the business

What amount can be deducted when calculating the sole trader’s taxable trading income?

A

£5,815. Only the business proportion of revenue expenses are allowable, so only 70% of the motor expenses can be deducted. The electricity and gas expense is wholly related to the running of the business and, therefore, deductible in full. The legal fees for the acquisition of the premises and the cost of the laptop are one off capital expenses and are not deductible as revenue expenses. However, the £1,500 laptop expense can be deducted under the annual investment allowance (as it falls within the deduction for plant and machinery). Therefore, the amount which can be deducted is (£450 x 70%) + £4,000 + £1,500= £5,815.

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19
Q

During the 2022/23 financial year, a UK technology start-up company had revenues of £800,000. Salaries and wages added up to £300,000. Interest on business loans was a further £10,000. The company also purchased some IT equipment for £100,000. The annual investment allowance for 2022 is £200,000.
What is the company’s taxable profit?

A

£390,000. As a general rule, all costs are allowed to reduce corporate income unless an exception applies. No exception applies to salaries and wages or interest on a business loan. Therefore, the £300,000 in salaries and wages is fully deductible, as is the £10,000 in business interest. Generally, business plant and machinery costs are deductible at the rate of 6% or 18% per year. However, the £200,000 annual investment allowance may be taken to offset the cost of qualifying assets (that is, long-term assets used by the company to provide a good or service, such as the £100,000 IT equipment here). Thus, the full £100,000 purchase price of the equipment is deductible and not just £18,000. (A) is incorrect because the wages and salaries expense are fully deductible too.

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20
Q

A company director received a salary of £90,000. She was also awarded a discretionary bonus of £30,000, which she received on 1 January 2022. The director also received £10,000 interest from cash deposits with a building society and £25,000 in dividends.
For tax year 2021/22, the personal allowance was £12,570. The basic rate applied to income up to £37,700, the higher rate applied to income from £37,701 to £150,000, and the additional rate applied to amounts above £150,000.
What is the tax due on the director’s interest?

A

£4,000. The director is an additional rate taxpayer as her total taxable income is in excess of £150,000 (£90,000 salary + £30,000 bonus + £10,000 + £25,000 dividends = £155,000). She is not entitled to a personal allowance, as that phases out £1 for every £2 for taxpayers with income in excess of £100,000. Her nonsavings, nondividend income is taxed first (£90,000 salary + £30,000 bonus). Next, interest is taxable. Additional rate taxpayers are not entitled to any personal savings allowance, so the £10,000 will be taxed within the band into which it falls. Here, the full £10,000 falls within the higher rate band since it’s on top of the £120,000 nonsavings, nondividend income we already took into account and does not exceed the additional rate band threshold (£150,000 for the tax year involved in the question). So it will be taxed at 40%. (£10,000 x 0.40 = £4,000). Remember, even if someone is an additional rate tax payer, they only pay additional rate on any income that goes into the additional rate band, not on all income they have made. Dividends will be taxed after that. The question does not ask about tax on the dividends, but the part still within the higher rate band will be taxed at the dividend higher rate and the part exceeding this band will be taxed at the dividend additional rate.

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21
Q

A woman purchased a house in London as her principal private residence on 1 April 2011. The woman lived in the house until 1 April 2017, when she went to work in Scotland for her employer. She returned to London on 1 June 2021. However, on her return, the woman went to live with her daughter and the house remained empty until it was sold on 31 August 2023.

How many months of ownership are exempt from capital gains tax under principal private residence relief?

A
  1. The woman actually lived in the house for six years, April 2011 until April 2017, which is 72 months. The last nine months of ownership will always be exempt provided that the taxpayer occupied the property as their home at some time. The woman does not qualify for the absence due to working elsewhere counting as occupation for up to four years nor for the absence for any reason counting for up to three years, as she did not reoccupy the home when she returned from Scotland.
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22
Q

On 1 January 2023, a woman sold a freehold property for £400,000 that she had acquired for £180,000. In the previous year, on 1 June 2022, the woman had bought a freehold property for £360,000. Both properties were used for trading purposes.
The woman is a higher rate taxpayer and so pays capital gains tax at 20%. The annual exempt amount for the tax year was £12,300.
What is the woman’s capital gain tax liability for tax year 2022/23?

A

£5,540. Replacement business asset relief (also known as roll-over relief) applies here. When a person disposes of qualifying business assets (such as land, buildings, and plant and machinery) and reinvests the proceeds in other qualifying business assets within one year before or three years after the sale, relief from the gain is available to the extent the proceeds were reinvested. Here, the woman had realised a £220,000 gain on 1 January 2023 from the sale of her trading property. But she had purchased other trading property on 1 June 2022, which is within the year before the sale. However, as the sale proceeds have not been fully reinvested, some of the gain cannot be deferred: £400,000 – £360,000 = £40,000. After deducting the annual exemption (£40,000 - £12,300 = £27,700), CGT will be payable at 20% (£27,700 x 20% = £5,540). Note that business asset disposal relief is not available on a disposal of an asset in isolation. The gain that can be deferred, £180,000 (£220,000 – £40,000), will be deducted from the cost of the replacement asset going forward.

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23
Q

A company has an accounting period that ends 31 December. The company has taxable total profits of £260,000 for the year ended 31 December 2023, comprising trade profits of £200,000 and a capital gain of £60,000 from the sale of a piece of equipment. The applicable corporation tax rate is 25%.
What is the corporation tax payable by the company for the year ended 31 December?

A

£65,000. The applicable corporation tax rate is 25%. Companies pay corporation tax on their total profits, including chargeable gains. Companies do not pay capital gains tax on their gains and do not get a deduction for the annual exemption. So, £260,000 x 25% = £65,000.

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24
Q

A company has an accounting period that ends 31 March. It has a corporation tax liability of £45,000 for the year ended 31 March 2023.
When is the corporation tax due for the accounting period ended 31 March 2023?

A

By 1 January 2024. Companies which are not large (generally, companies with profits of less than £1.5 million) must pay their corporation tax nine months and one day from the end of the accounting period. 

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25
Q

A large UK-based textile producer has bought some denim fabric from a supplier, paying £1,200,000, which included £200,000 VAT. Half of the denim was used to produce blue jeans for adults and the other half was used to produce denim jackets for toddlers, which are zero rated for VAT.

The denim jackets were sold for £4.8 million, and the blue jeans were sold for £3.6 million.

How much VAT must the textile producer pay the HMRC?

A

The textile manufacturer would have to pay £400,000. Because children’s clothes are zero-rated for VAT, the seller can still recover VAT paid for inputs, such as money paid for the fabric, even though no VAT has been charged on the sale. The sale of adult blue jeans would include VAT of £600,000 (£3 million plus 20% equals £3.6 million). The VAT charged of £600,000 can then be offset by the VAT paid for the fabric, which was £200,000. Therefore, the net amount to pay HMRC is £400,000

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26
Q

Requirements for a public company limited by shares?

A

Additional filing requirements

£50k minimum nominal share capital

Trading certificate

MInimum 2 directors (1 for ltd companies)

Company secretary required too

Accounts must be filed within 6 months of the accounting reference date (9 for ltd companies)

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27
Q

What is a memorandum of association?

A

Statement signed by persons wishing to become members of the company i.e. agreeing to become its members.

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28
Q

How does a company change its name?

When does the new name become effective?

A

By SR of the members.

Effective when CH issues a new certificate of incorporation.

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29
Q

Do preference shares have voting rights?

A

Typically NO.

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30
Q

What transactions would a trustee in bankruptcy have to show the sole trader was insolvent at the time of the transaction?

A

For an individual, there is no requirement to prove the debtor was insolvent at the time the transaction was made if it was made within two years before the bankruptcy and insolvency is presumed if the transaction is to a close relative. Thus, the trustee would not have to prove insolvency regarding the transfer to the sole trader’s spouse or with regard to the sale of the delivery vehicles (because that sale was within two years of the petition). But the transfer of the plant and machinery took place more than two years ago and was not to a close relative, so there, insolvency would have to be proved.

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31
Q

Do Articles of Association need to be submitted to the Registrar of CH when submitting?

A

(A) There is no requirement to file articles of association when setting up a company. It is open to the promoter of a company to choose to adopt the model articles of association applicable to the company. All of the other options are required to be set out on the application for registration.

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32
Q

A company was incorporated several years ago with the Companies (Model Articles) Regulations 2008 as its articles of association. The company has 10 shareholders holding equal shareholdings. The board have passed a resolution to register a transfer of shares from one shareholder to another.

Which of the following correctly describes the steps which must be taken after the board resolution?

A

A new share certificate must be issued and register of members must be updated. (C) After the board has resolved to register a transfer of shares, the register of members must be updated and a new share certificate must be issued to the transferee. (A), (D), and (E) are incorrect as Companies House need not be notified within 14 days. Instead, this information is sent on the Annual Confirmation Statement. (B) is wrong as there is no change to the persons of significant control here–one shareholder has gone from 10% to 0% and one has gone from 10% to 20%, but no shareholder has more than 25% of the voting shares (the threshold for a person with significant control).

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33
Q

If someone defaults on a mortgage / debt and there are two fixed charges over the property, who gets paid first?

A

The bank (first) will be repaid in full and the friend will receive the remaining £10,000. If there is more than one charge on the property, the proceeds of sale will be used to pay the first charge and then the second charge.

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34
Q

If a company goes into liquidation, in what order will the liquidator pay back any debts?

A

The liquidator must pay back the creditors of the company in a set order: expenses of winding up (the liquidator’s and professional advisers’ fees), preferential debts (holiday pay due to employees, wages of employees due in the last four months, and HMRC in respect of VAT, PAYE, and National Insurance contributions), monies secured by floating charges in order of priority, unsecured creditors, and finally, shareholders

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35
Q

Monies places in a companies share premium account are not to be used for what?

A

Amounts in the share capital account or in the share premium account are not available for dividends. They are classed as a non-distributable reserve of the company and there are strict rules about maintaining capital and not returning it to shareholders.

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36
Q

Are floating charges granted within 12 months of insolvency valid?

A

A floating charge granted within 12 months of insolvency is invalid if it was not given in exchange for fresh consideration and the company was insolvent at the time of the transaction or became insolvent as a result.

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37
Q

Under the Model Articles, what is the process for removing a director from a company?

A

Under the Companies Act 2006, removing a director from office requires only an ordinary resolution of the shareholders (a simple majority of more than 50%). However, special notice is required-28 days (normally, a general meeting may be called on 14 days’ notice).

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38
Q

Promoter’s personal liability on a pre-incorporation contract?

A

If a promoter enters into an agreement with a third party for the benefit of an as yet unincorporated company, the promoter is personally liable on the contract. There are ways around this, e.g., by assigning or novating the contract after incorporation to the company

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39
Q

What qualifications are required for a Company Secretary?

A

There are no qualifications required to become a company secretary.

Under the Companies Act 2006, it is the duty of the directors of a public company to take all reasonable steps to secure that the secretary of the company is a person who appears to them to have the requisite knowledge and experience to discharge the functions of secretary of the company, and has one of the required qualifications.

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40
Q

How are a company’s articles amended? What are the filing requirements?

A

The shareholders change the articles by special resolution and all special resolutions must be filed at Companies House. There is no fee for a change of articles and no specific form which must be filed

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41
Q

A company wishes to change its name by special resolution at a general meeting. The company has adopted the Companies (Model Articles) Regulations 2008 (unamended) as its articles of association. The company has 12 shareholders and has an issued share capital of 100 ordinary £1 shares. The majority shareholder holds 89 shares, and the remaining shareholders hold one share each.

Who will need to consent to short notice for the general meeting to be held validly on short notice?

A

The majority shareholder and six other shareholders.

To hold the meeting on short notice, the majority shareholder and six other shareholders must agree. A general meeting may be held on short notice if agreed by the majority in number of the shareholders holding 90% of the shares. As there are 12 shareholders in this company, a majority in number would be seven. And since those seven must hold at least 90% of the shares, we would need the majority shareholder to be one of the seven.

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42
Q

How are costs to repairs of a building factored in to CGT?

A

You would not subtract the cost of repairing a roof that was already there - only costs that enhanced the value of the property.

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43
Q

Which do you subtract first in a CGT calculation - annual allowance or losses brought forward from previous years?

A

annual allowance and next any losses brought forward

44
Q

An investment adviser has recently started a freelance lecturing business and has been told that by choosing a non-5 April-year-end some profits will be taxed twice, known as overlap profits. She has heard that relief could be obtained for these overlap profits.

What is the best option available to the investment adviser for relieving the tax on overlap profits?

A

(E) Relief from tax on overlap profits is available only at cessation or if the taxpayer changes her accounting date to a month nearer to 5 April (for example, if the adviser has a December year end, she would need to change it to a January, February, or March year end to be eligible).

45
Q

A company started to trade on 1 May 2022 and prepared its first set of accounts to 31 December 2022.

On which date must the company submit a corporation tax return in respect of the period to 31 December 2022?

A

12 months after 31 December 2022. Corporation tax returns are always submitted 12 months after the end of the period of account, whereas the corporation tax liability must be paid 9 months and 1 day after the end of the period of account.

46
Q

Can anyone register to pay VAT even if turnover is less than £85k?

A

Yes

47
Q

What are the requirements for no. of directors/shareholders/sceretaries of a public company?

A

A public limited company is required under the Companies Act 2006 to have a minimum of two directors, one shareholder, and an appropriately qualified company secretary.

48
Q

For a declaration of a dividend (company incorporated this year), what is the procedure to be followed?

A

Board of directors have discretion to declare a dividend but it must be approved by ORDINARY resolution of the shareholders.

49
Q

When you see a question on CGT that involves a scenario where a person is selling/has sold their business, what should you always consider?

A

Business Asset Disposal Relief (Entrepreneur’s Relief) - gains only charged at flat rate of 10%

50
Q

Relevant time period for a transaction at an undervalue

A

The relevant time period for a transaction at an undervalue is within two years of a company’s insolvency.

51
Q

What documents must be submitted when accounts are filed to CH for a small company?

A

The only documents that must be included with the accounts of a small company are a profit and loss statement and a balance sheet which give a true and fair view of the company.

Medium and large companies must also include an independent auditor’s report, a director’s report, and a strategic report. Chairman report usually included but no legal requirement for one.

52
Q

Can someone who is bankrupt then enter into a partnership?

A

No because a bankrupt cannot be a partner.

53
Q

Are gains made from sales of farmland exempt from CGT?

A

No, CGT is payable.

54
Q

Gains on what are exempt from CGT?

A
  • wasting chattels with life of less than 50 yrs such as race horses
  • sales on cars
  • tangible personal property sold for less than £6k
  • prize money & gambling winnings
55
Q

How must the decision to wind up a company be passed?

A

By SR of the SHs

56
Q

When can SHs demand a poll vote?

A
  • 5 or more SHs
  • SHs with 11%+ of voting rights
  • SHs with 10% of paid up capital on shares
57
Q

Can a sole trader who made a trading loss offset that loss against any CGT gains made in the same year?

A

A sole trader who has generated a trade loss may use this trade loss against any gains but only AFTER they have made a claim against income (ignoring personal allowance) in the same tax year.

58
Q

How can a creditor apply for a company to be wound up? Under what circumstances

A

A creditor must be able to prove the company is insolvent to be able to issue a winding up petition. A creditor can prove insolvency by either: serving a statutory demand which is not paid within 21 days in respect of a debt of £750 or more, or showing that they obtained a judgment, attempted to execute the judgment, and that the debt is not fully satisfied. Here, the creditor obtained a judgment, but the bailiff nonetheless was unable to obtain full payment from the debtor.

59
Q

What are the letterhead requirements for a company?

A

A company must disclose on letterhead:
- its registered NAME
- the PART of the UK in which the company is registered
- the company’s registered NUMBER
- the address of the company’s registered OFFICE.

If a company chooses to display the name of any director on its letterhead, it must include the name of EVERY director on the letterhead.

60
Q

How many unsecured creditors must approve an IVA for it to be binding on ALL unsecured creditors?

A

Approval of an IVA requires the agreement of the debtor’s unsecured creditors holding at least 75% in value of unsecured debt. If such approval is obtained, the practitioner’s proposals become binding on every ordinary unsecured creditor who has notice of the meeting.

61
Q

Is entering into a partnership agreement conclusive evidence of a partnership?

A

No, because purporting to enter into a partnership agreement does not create a partnership. If a business relationship does not satisfy the definition in the Partnership Act, there is no partnership.

62
Q

When does the review period following a company’s first annual confirmation statement begin?

A

The date the company was incorporated.

63
Q

Deadline for filing the confirmation statement at the end of the review period.

A

14 days

64
Q

What must be filed at Companies House following the change of registered office?

A

A Change of Registered Office Address form only.

65
Q

What must be filed at Companies House in respect of a director’s appointment?

A

The Appointment of Director form within 14 days.

65
Q

True or false? Only a profit and loss statement and balance sheet must be included when the accounts of a small company are filed at Companies House.

A

True

66
Q

What is the effect of an individual voluntary arrangement (IVA) on the creditors?

A

The creditors accept less in payment than is owed to them.

67
Q

What is the effect of the interim order issued on application of an insolvency practitioner?

A

It prohibits creditors from commencing proceedings against the debtor whilst the insolvency practitioner assesses the debtor’s finances and tries to create and implement an IVA.

67
Q

True or false? Only a solvent company may choose to start a voluntary liquidation in which its assets are sold.

A

False, the directors of insolvent company may also start a voluntary liquidation.

68
Q

What is the minimum level of acceptance of an IVA for it to become binding on all creditors?

A

At least 75% in value of a debtor’s unsecured obligations.

69
Q

What type of resolution is required when directors of a company resolve that the company is insolvent and should be placed into liquidation?

A

Special resolution

70
Q

Who is paid first in liquidation? Floating charge holders or preferential debts such as employee wages?

A

Preferential debts are paid before floating charges

71
Q

What is the minimum number of members an LLP can have to ensure statutory compliance?

A

2

71
Q

If membership of an LLP drops to one, does the sole remaining member become personally liable for the debts of the LLP?

A

Yes, but only for business they carry on without a second member after six months have passed.

72
Q

In the absence of agreement what vote is required to admit a new member to an LLP?

A

A unanimous vote of the current members.

73
Q

What is the clawback period to determine whether an event was a preference?

A

Six months unless the preferred creditor is a connected person, in which case it is two years.

74
Q

Before you can be subject to UK taxation on your worldwide income, you must be:

A

A resident in the UK

75
Q

True or false? A partnership does not pay income tax but must still nominate a partner to fill in a Partnership Tax Return.

A

True

76
Q

Are taxes on overlap profits ever relieved?

A

Yes, relief is available for this double payment either when the taxpayer changes their accounting date closer to 5 April or when the taxpayer ceases to trade.

76
Q

True or false? If a sole trader or partner transfers a business to a company in exchange for shares, the sole trader can set off any unused trading losses from the transferred business against salary or dividends they receive from the company whilst they own stock until the loss is used up.

A

True in all respects.

76
Q

True or false? Articles may legally be amended in a way that adversely affects interests of members who own a minority interest in the company.

A

True, so long as the amendment is in the best interests of the company.

77
Q

If a person sells a collectible car at a profit, is the profit subject to CGT?

A

No because car sales are exempt from CGT.

78
Q

A company must ensure that when a director leaves the company, their service agreement remains available for inspection by the shareholders for how long?

A

1 year

79
Q

Does a shareholder have a right to inspect the company’s register of members?

A

Yes, if they have a proper purpose related to their rights as a shareholder, the company has five working days to comply with the request.

80
Q

Who may call a shareholders meeting?

A

The directors of their own accord or on demand by shareholders owning shares representing at least 5% of the paid-up voting capital shares.

81
Q

If a shareholder requires the directors to call a meeting, within what timeframe should the meeting be held, after the notice convening the meeting is sent out?
Responses

A

28 days

82
Q

What notice is required to hold a shareholders meeting for a company with unamended Model Articles?

A

At least 14 clear days’ notice plus two days for deemed delivery if the notice is not hand delivered.

83
Q

If a taxpayer sells some UK land on 1 May 2023, when will the CGT be due?

A

The CGT due must be reported and paid within 60 days of completion, so 30 June 2023.

84
Q

True or false? Under Replacement Business Asset Relief/Roll-Over Relief, gain on the sale of a business asset will be deferred by reducing the acquisition cost of a replacement business asset by the amount of gain invested if the replacement asset is purchased within one year before or three years after the replaced asset is sold.

A

True

84
Q

True or false? A person who was absent from their home because they were working overseas will be deemed to have occupied their home during the absence so long as they lived in the home before and after the absence.

A

True

85
Q

True or false? Capital losses can be offset against either a taxpayer’s income or gains.

A

False, they can be used only to offset capital gains.

86
Q

If a company’s profits do not exceed £1.5 million, what is the deadline for a company to pay its corporation tax?

A

Nine months and a day after the end of its accounting year.

86
Q

What is the corporation tax rate for profits above £250,000?

A

25%

87
Q

True or false? If a company’s profits exceed £1.5 million, they must pay their taxes in quarterly instalments.

A

True

88
Q

True or false? If a close company lends money to a participator at a below-market rate, the forgone interest is a taxable benefit to the borrower which must be reported to HMRC and taxed as earnings if the loan is to an employee or director and it exceeds £10,000.

A

True

88
Q

Typically, how long will a written resolution give members to signify their agreement before it lapses?

A

28 days

88
Q

What is the minimum amount of time a company may give a shareholder to exercise their preemption right?

A

14 days

89
Q

VAT on newspapers and insurance?

A

0%

90
Q

If a property owner opts to tax, may the option be revoked?

A

Yes if within 3 months and option has not been put into pratice.

If it has then it can be revoked after 20 years.

91
Q

What is the basic tax point for the supply of goods or services for purposes of determining VAT?

A

The date the goods are made available to the buyer or the date the services are performed.

92
Q

A business receives an order for goods on 28 July, delivers the goods on 1 August, invoices for the goods on 10 August, and receives payment from the customer on 31 August. What will the tax point be for VAT?

A

10th August - date of invoice

93
Q

True or false? A VAT registered business that only or predominantly makes zero-rated supplies is allowed to submit monthly VAT claims to reclaim their input VAT to aid cashflow.

A

True

94
Q

A VAT registered business has submitted consistently late VAT returns. What is the maximum penalty that HMRC could impose?

A

15%

95
Q

Can the board enter into a loan without shareholder approval?

A

Yes

96
Q

Can the board enter into a loan without shareholder approval?

A

Yes

97
Q

What is an endowment mortgage?

A

A mortgage linked to a life insurance policy.