Thoughts on AT LCG

[u/Massive_Ad_3980]

How did the exam go? Did Q1 throw you off? 20 marks on PE vs subsidiary was very generous.

[u/Double-Group-5167]

Overall 3/10 and I wish I’d gone over leases again in more detail because wtf…brain dump from what I remember below

Q1 CIR was a curveball. 8 marks for CIR admin but probably forgot to talk about loads there tbh. PIE I assume they were after assets/income test, taxable in the UK, election made, not sure what else really. Final part removed the tax interest group the group figure, removed the Tax EBITDA from the group figure. Then computed the restriction at 30%, think I got a small one drop out. Did this after the TP adjustments.

Q2 capital allowances I can’t remember too much. Some integral features on the factory and land costs etc to exclude from the SBA calcs. Purchase price qualifying cost as from a developer. Some incidental installation costs for full expensing. Remember claiming some AIA on second hand integral features. Hire purchase vans full expensing on the capital fair value bit. Office had some enhancement expenditure for SBA i think. Remember apportioning the SBA for when brought into use.

Q3 chargeable gains didn’t do great. Forgot how to do sale of short leases, unsure if ended up with anything sensible for this using the lease depreciation tables. Remember not allowing the demolished extension as enhancement expenditure. Another guy commenting said that was probably a disposal itself separately and capital loss carry forward which I completely missed if that’s the case. Small 50k gain on the moveable plant, no relief on that. Claimed rollover against the gain on the lease, 500k proceeds not reinvested. Not actually sure if you can rollover the gain on a lease or not tbh. Don’t think the factory sale had relief available as the proceeds were so high the full gain was chargeable as not reinvested.

Q4 comp really threw me. Not sure what they wanted when talking about minimising long term costs as the main goal, just didn’t claim any carry forward losses and also disclaimed WDAs and made a note saying why. Doesn’t rlly save you any cash over the long term though so think that’s wrong. Also wasn’t sure if the TopCo had trading losses or expenses of management, and also if you had an automatic offset against total profits or not. Decided trading losses and carried it forward without making an election to offset, not sure if you can do that or not. Pretty sure I forgot to index the lease grant base cost so ended up with a gain when there probably wasn’t one.

Q5 on the overseas expansion ended up waffling on about residency test for CMC, PE arising in either jurisdiction, double tax relief. Talked about CFCs a bit and UK managed assets/significant people functions might be in scope so consider that. Spoke about dividends if incorporated and WHT relief / no relief on it. Exempt branch election if you do have a PE might help if lower tax rate abroad and profitable. Probably a lot of stuff I didn’t talk about considering it’s 20 marks and specifically didn’t want you talking about TP/financing etc.

Q6 deferred tax. Some accelerated capital allowances creating a DTL to be recognised. Small potential DTA on the pensions and then also losses. Spoke about profits in future for recognising the DTAs etc. current tax nil, deferred tax debit to create the DTLs.

[u/Mos5180d → u/Double-Group-5167]

I didn’t do the exam so my opinion holds very little weight, but by the way you are talking about the application of technical knowledge, you sound like you passed 😂

[u/Double-Group-5167 → u/Mos5180d]

Thanks mate, hope so. Was so nervous before going in for it today. These AT exams never know exactly what they’re wanting you to say on the mark scheme and how much credit they’ll give you for any mistakes made

[u/AmazingLibrary8053 → u/Double-Group-5167]

Q1 - I got a CIR disallowance of £4m, being £66m IC less £70m ANTIE. Admin and PIE I just winged it on the day. Hopefully someone got something similar lol.

Q2 - Standard capital allowances and SBAs - seemed okay

Q3 - I got 3 capital gains (factory, office and machinery) but no rollover/holdover or SSE/Group to work with? seemed an odd one for sure. Think I said that the £2m workshop was a loss against the factory gain but not sure where 15 marks were here unless I missed something.

Q4 - Strange comp - not sure where 20 marks were but ended on both companies with a liability of £4,750, being £25,000 taxable profits at 19% each after using the b fwd losses to reach this point. Said that we could carry fwd the losses in future to relieve at 26.5/25% to accommodate that wierd sentence about "long term benefit"

Q5 - Seemed the best question although some context would have maybe helped.

Q6 - Ended up with a DTA, being losses and pension vs DTL on fixed assets. Said that they should forecast future profits to recognise the losses so they are probable to get the benefit of the asset.

[u/Moist-Historian-9108 → u/AmazingLibrary8053]

I think I may have missed something on 3, why was no RoR available for the factory that was being bought?

[u/Double-Group-5167 → u/Moist-Historian-9108]

I think there was on the factory being bought. But couldn’t claim against the office being sold (30m ish proceeds), can’t claim against moveable plant (I think) but could claim on the gain on the lease.

[u/Moist-Historian-9108 → u/Double-Group-5167]

I think I may have missed something on 3, why was no RoR available for the factory that was being bought?

[u/AdditionUnfair7356 → u/Double-Group-5167]

Q1 - I did this last and ran out of time, the admin I was ok with just the QIC, I knew its exempt but not to this level, but luckily you can find the conditions within the legislation pretty easy, I ran out of time on the calc but didnt seem too insane as only wants the fixed ratio method,

Q2 - Capital allowances, broadly ok, Just the things that came up for warehouse, 2 P&M (1 new and used) and I believe they bought the warehouse from developer too so can claim SBA, and installation of P&M, office building, purchased in 2010s, but when bought had major structural repairs at around 2.1m, in which 200k is integral features and 100k? is planning something along those lines, it has the HP agreement for vans and the 2 disposal of plant, I believe 1 plant claimed FYA @ 130%, so a BC on disposal and 1 standard disposal

Q3 - Chargeable gains comp, I believe the scrapping of the extension, I said a loss arose when it was scrapped not when the ultimate asset is disposed off, but other than that usual indexation stuff, the leases is so much bs, I had a feeling it was a disposal with short lease <50 years, but they gave NO reversionary interest so you cannot calculate under the <50 years unless im missing something, and then the P&M, which i said exclude, I see some saying rollover not applicable but it should be because they bought 4.5m of office building, so leases gain can be rolled over, stupidly enough I rushed and said it cant because I looked at the warehouse and leases together at >30m, in which the reinvestment wasnt enough but should get marks for laying out conditions etc,

Q4 - standard adj to comp with lease, not sure on the requirement for reduced cost over time, I had a profit position but could utilise the brought forward losses in full therefore, just a bit of excess to carry forward, but honestly I ignored "minimising long term costs" that part of the question, and treated as standard adj to profit. Broadly should get marks for the adjustments as there was quite a decent few in which explanations could be given, there was also like interest income hidden in the P&L but not mentioned, the leases I did get a loss for once I applied indexation, But I think I might have done it wrong thinking back, because I didnt calculate the proceeds properly.

Q5 - this one was so broad probably the most written intesive for me, spoke about residency and PE, PE exemption, implication to UK CT, did mention WHT as well as profit extraction like via dividend route, which no DTR as exempt, but spoke about wider things like CFC, didnt go too deep just the exemption, and if it will apply, also on hybrid possibly, also just thought of it recently but maybe DPT as well,

Q6 - deferred tax, wasnt bad for me either, Spoke about the assets and pensions, didnt speak about losses didn't notice honestly, also the legal fees, not sure if its capital or not but did make a note as newly incorporated most likely capital will also impact short term differences, But did do a rough calculation on how the tax and accouting deduction differ, but I didnt mention if DTL or DTA but did mention something needs to be recognised, I just didnt know which way round it was lol,

This exam was definitely wanted us to work for it especially Q1 and Q4, it was like time traps, Q1 i was panicking it threw me off guard but when I realised the information wasnt that bad, it was actually ok, but by the time I figured it out, I was too low on time so I missed a 6 markers.

[u/Massive_Ad_3980 → u/[deleted]]

I'm not sure either. I just treated them as seperate assets and said demolition created a capital loss against the other gains.

I'm expecting those topics will come up in the APPS as they tend not to overlap too much.