Warwick Ltd is an unquoted trading company that was incorporated in the UK in 1995,
with headquarters in England. In 2007, the company set up a wholly owned subsidiary,
Glasgow Ltd, operating in Scotland.
Warwick Ltd has always prepared its accounts to 30 April each year, but has decided
to change its accounting date to 31 August. It has calculated its fully adjusted trading
profit before capital allowances for the 16 month period to 31 August 2019 to be
£1,709,600.
At 1 May 2018 Warwick Ltd had £134,750 trading losses brought forward, and unused
capital losses of £5,840.
In the 16 month period ended 31 August 2019, Warwick Ltd purchased the following:
£
7 May 2018 Purchased machinery for the factory
(including £7,800 on alterations needed to the
factory to install the machinery which was charged
through the statement of profit or loss account)
135,000
3 July 2018 New motor car for the sales director
(CO2 emissions 107 g/km, used 30% for private use) 22,330
14 October 2018 Sold office furniture (original cost £7,900) 5,515
24 May 2019 Purchased a lorry
(CO2 emissions of 127 g/km, no private use) 70,300
30 May 2019 Purchased machinery for the factory 265,000
15 June 2019 Second hand motor car for the factory manager
(CO2 emissions 49 g/km, used 25% for private use) 8,955
Final Page 6 of 14
EC3085
All Candidates
On 1 May 2018 the tax written down values for plant and machinery were:
£
Main pool 72,190
Special rate pool 45,950
Warwick Ltd received interest on £20,000 11% Treasury stock 2025. The interest is paid
six-monthly on 31 December and 30 June each year.
On 30 June each year, Warwick Ltd received fixed dividends of £30,000 on preference
share investments it owns in an unrelated company.
Property income receivable for the 16 month period was £49,600 and accrued evenly
over the period.
On 13 June 2019 Warwick Ltd disposed of a warehouse for £425,000. It had purchased
the warehouse on 14 September 1999 for £163,400, and on 7 December 2005 spent
£48,600 on an extension to the warehouse for more storage. Legal and professional
fees of £4,240 were paid in relation to the sale, and £3,530 were paid in relation to the
purchase.
Warwick Ltd had always used the warehouse for the purposes of its trade.
A donation of £3,950 was made on 31 August 2018 to the National Trust, a registered
UK charity.
Up to 1 May 2018, Warwick Ltd has always been a small company for corporation tax
purposes.
Required:
(a) Calculate Warwick Ltd’s:
(i) Chargeable gain arising on the disposal of the warehouse on 13 June 2019.
(4 marks)
(ii) Corporation tax liabilities arising in respect of the 16 month period ended
31 August 2019. State the due dates for payment of the corporation tax
arising and the filing date.
(23 marks)
(b) Advise Warwick Ltd on how it can reduce its corporation tax liability by claiming
rollover relief, outlining the conditions that apply, any time limits that should be
adhered to, and the consequences of making a claim.
(8 marks)
Ignore VAT in this question.
Total: (35 marks)