International Taxation: Group Structure, Loss Relief, Capital Transactions

INTERNATIONAL
TAXATION

TABLE OF CONTENTS
QUESTION 1..................................................................................................................................3
a. Diagram of the group structure and the limit for tax rates.......................................................3
b. Loss relief groups and maximum amount...............................................................................4
c. Tax treatment of the capital transactions.................................................................................5
d. UK mainstream corporation tax liabilities...............................................................................6
e. Income tax consequences.........................................................................................................6
f. Tax implications.......................................................................................................................6
QUESTION 2..................................................................................................................................7
a. Comparison of expansion options............................................................................................7
b. Advice......................................................................................................................................7
c. Loss relief.................................................................................................................................7
d. VAT registration......................................................................................................................8
QUESTION 3..................................................................................................................................8
a. Domicile status of each employee...........................................................................................8
b. Claim to remittance..................................................................................................................9
c. Calculation of UK tax payable.................................................................................................9
REFERENCES..............................................................................................................................11

QUESTION 1
a. Diagram of the group structure and the limit for tax rates
The group structure indicates the holding companies and the subsidiaries company. the
following structure can be prepared for the Opus Plc at present based on its holdings:
Tax payment dates:
Since all the companies are within the limit of the £ 1.5 million profits, all are categorised
as non- large company. Therefore the tax payment dates are ascertained as per the normal rule
i.e. 9 months and 1 day after the end of chargeable accounting period (Maffini, Xing and
Devereux, 2019). In this case, all the companies have the same ending date i.e. 31 March, 2020,
and hence their tax payment dates would be 1st January, 2021.
Capital Gain Tax Group:
Capital Gains group
Groups Opus Plc, Sally Ltd. and Waga Inc form a single
capital gains group.
Waga Inc. and Tess Ltd. form another capital
gains group.
Rationale The effective interest of the principal company
i.e. Opus Plc is not more that 75% in case of Tess
ltd and hence it is not included in the same group.
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Opus Plc
Sally Ltd.
(90% holding)
Waga Inc.
(90% holding)
Film Ltd.
(5% investment)
Tess Ltd.
(80% holding)

Note: In the entire evaluation Waga Inc. has been included in the capital gains group
because despite being a non- resident of UK, the company has a permanent establishment in UK
only. Therefore, these companies are allowed in the group and are treated as residents.
b. Loss relief groups and maximum amount
The loss relief group for the current Opus Plc can be identified in following manner:
Loss relief group
Groups Opus Plc and Sally Ltd.
Opus Plc and Waga Inc.
Waga Inc. and Tess Ltd.
Rationale There are only two companies in all the groups
because the holding company does not have at least
75% interest in the other companies except the
immediate subsidiary (Walker, 2019). In case of
Tess Ltd., it is only 72% interest and hence it is not
included in the same group.
It is evident that Waga Inc. has faced the total loss of £180,000 and £120,000 but in the
current loss relief, only the amount of £180,000 can be taken into consideration as the other
establishment does not categorise as a resident of UK and hence cannot claim the amount.
Waga Inc can set of its loss of with two companies:
With Opus Plc
UK trading profit £482000
Interest receivable £42000
Net overseas rental £15000
(Interest Payable) (£5056)
Net taxable profit £533944
Group relief (Waga Inc) (£180000)
Remaining profit £ 353944
With Tess Ltd.:
Net taxation profit = £60,000
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