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Part (b):

Following additional conditions must be satisfied in order to give rise to capital gains on the sale of
shares:

1. The total shareholding in the company must be less than 30% after the buying back of shares by
the company.
2. Reduction in shareholding before and after buy back must be 25% or more.
3. Shareholder must be UK resident.
4. Shares must have been held in the company for at least 5 years.

All of the above conditions have been satisfied. Olma’s shareholding was already less than 30% and the
reduction in her shareholding is 100%. She is UK resident and has kept the shares for more than 5 years.

Part (c):

(i)

(ii):

Tax adjusted Trading loss for year 23/24:

Olma business’s year end is not 31 march. Hence the opening year rule will apply and her tax year 23/24
for business will be from January 24 to March 24.

Her tax adjusted trading losses before capital allowance deduction for the year 23/24 will be 36,000
(12,000 * 3).

Since furniture and equipment were purchased within 12 months before the start of business, 100% AIA
will be given which will increase the tax adjusted losses to 42,000 (36,000 + 8,000).

Offsetting of trading losses against income tax/ capital gains tax:

Normal Trading Loss:

Normal trading loss can be relieved against current year total income, last 12 month’s total income or
carried forward against future trading income in any order. Whenever reading loss is claimed against
total income, it can also be set off against capital gains.

Under normal trading loss, the current year’s total income can be set off by trading loss. Any remaining
trading loss will be set off against capital gains. Olma’s total income for the year 23/24 is 40,200 (6,700 *
6). 27,600 of taxable income will be set off against the current year’s loss after the deduction of personal
allowance i.e., 40,200-12,570. Remaining loss of 14,370 can be setoff against the capital gains of year
23/24.

Total capital gain for the year 23/24 in 110,000 (150,000 – 40,000). The remaining capital gain of 95,630
will be taxable at 10% under business asset disposal relief as Olma owned more than 5% of shares of an
unquoted company for more than 2 years.

Opening Year Trading Loss:

Trading loss of first four years can be set off against the total income of previous 36 months on FIFO
basis. However, maximum trading loss relief is limited to 50,000 + trading income.

Under this rule, employment income of 40,200 for the year 20/21 will be set off at 20% and 40%.

Most Beneficial way of Tax savings:

The most beneficial way of tax saving can be claiming opening year trading loss as it will create a
repayment of 8,540 ((37700 * 20%) + (2500 * 40%)). She can also set off tax against future trading profit
of year 25/26. Tax adjusted trading income of 25/26 will be 101,000 which will result in a tax liability.

Part (d):

For employment benefit to be exempt from the shares received under share incentive plan, Hogan needs
to ensure that the shares are held for at least 5 years. Any dividend received on those shares will also be
exempt.

If Hogan sells these shares within 3 years, employment benefit will be charged at disposal proceeds.

If Hogan sells these shares within 3 to 5 years, employment benefit will be charged at lower of disposal
proceeds or MV at grant date.

Part (e):

Hogan is domiciled by origin because he was born in UK. Hogan will also be resident in year 25/26 and
hence he will have to pay any IHT liability arising on the gifts.

IHT Liability:

Value of gift 380,000

Annual Exemption 24/25 and 25/26 (6,000)

Chargeable lifetime transfer 372,000

NRB (25/26) 325,000 (325,000)

(Last 7 years chargeable transfer) 0

47,000
CLT @ 25% 11,750

IHT of 11,750 will be payable by Hogan. CLT is charged at 25% because IHT is being paid by Hogan.