The Chartered Tax Adviser Examination

November 2007

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PAPER IV
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PROFESSIONAL RESPONSIBILITIES, ETHICS AND LAW

TIME ALLOWED – 3 HOURS

• You are required to answer all of the questions.

• Start each answer on a new sheet of paper and write on one side of the paper
only.

• All workings should be shown and made to the nearest month and pound
unless the question specifies otherwise.

• Marks are specifically allocated for presentation.

• Candidates who answer the law part of this paper in accordance with Scots law
or Northern Ireland law should tick the appropriate box on the front of the
answer folder.
 PART A – PROFESSIONAL RESPONSIBILITIES AND ETHICS

You should answer ALL questions from this Part.

1. You are a tax manager in a medium sized firm of Chartered Tax Advisers. Mr Jones, a
partner of the firm, has advised you that he was approached yesterday by a family
owned corporate client requesting his assistance in the purchase of the business of
another privately owned limited company. The other limited company is also a client of
the firm and Mr Jones today received a letter from that company outlining the
impending takeover bid and seeking his assistance. Neither company is aware that the
other is a client of the firm.

Mr Jones is keen, if it is at all possible, for the firm to act for both parties but fears this
may not be appropriate from an ethical perspective.

You are required to draft a memorandum to Mr Jones setting out the ethical
considerations and recommended best practice as suggested by The Chartered
Institute of Taxation. (10)

2. You are a Chartered Tax Adviser and have worked in the tax department of a major
multinational company for the last two years. Joe, a friend of yours who is also a
Chartered Tax Adviser, is considering moving out of the profession to take a similar job
to yours in another company and has asked you to explain to him how the professional
rules of The Chartered Institute of Taxation will apply to him in his new job.

You are required to write a letter to Joe, summarising how The Chartered
Institute of Taxation Guidelines for members in employment will apply to him in
his new job. (10)

3. You are a specialist offering tax seminars to small tax practices. A local practitioners’
group has approached you and requested that you deliver a short presentation at their
next meeting. Its area has seen a rise in the number of tax accountants who have
been the subject of an investigation by HM Revenue & Customs and it is this topic they
would like you to address.

They would like you to provide general advice concerning investigations of tax
accountants. They have suggested you might wish to include pointers as to what might
cause an investigation to be commenced; the respective powers and duties of HM
Revenue & Customs and the accountant during the course of the investigation; and
finally, the sanctions that may be imposed depending upon the outcome of said
investigation.

You are required to prepare a short presentation on the above in a form suitable
to be handed out at the meeting. (15)

4. You work as a manager in a medium sized firm of Chartered Tax Advisers. The
partners are keen to begin a marketing campaign to gain more quality clients. They are
aware that The Chartered Institute of Taxation has issued guidance on this matter and
wish all staff to be aware of the guidance so that they can be confident that all
initiatives will be within its terms. As a result they have asked you to run a training
session for staff giving details of The Chartered Institute of Taxation guidance.

You are required to summarise The Chartered Institute of Taxation guidance on

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 PART B – LAW

You should answer ALL questions from this Part.

5. Ryan is a property developer, who has just completed a development of luxury

Flats are available for sale at a price of £150,000 each. However, there is some scope
for negotiation. Mary would like to purchase three flats in the development. Ryan is
prepared to give a discount, provided that exchange takes place on all three flats at the
same time and that completion of all three purchases takes place a week thereafter.

After some consideration, Ryan has agreed to sell three flats to Mary for £130,000
each, provided that exchange in respect of all three flats takes place on the same day.

Each flat has separate title deeds and will be subject to a separate contract.

You are required to apply the rules of statutory interpretation and explain, with
reasons, whether the transactions referred to above are “linked transactions” for
the purposes of s.108 Finance Act 2003 (see below) and whether the position
would be different if Mary had not achieved a discount for buying three flats at
once.

You should assume it was the stated intention of Parliament that s.108 FA 2003
is aimed at preventing people selling one plot of land artificially divided into two
plots so as to avoid additional Stamp Duty Land Tax arising. (10)

Relevant legislation contained in s.108 of the Finance Act 2003 is reproduced below:

Section 108 Finance Act 2003

108 Linked transactions

1) Transactions are "linked" for the purposes of this Part if they form part of a
single scheme, arrangement or series of transactions between the same vendor
and purchaser or, in either case, persons connected with them.

Section 839 of the Taxes Act 1988 (connected persons) has effect for the
purposes of this subsection.

2) Where there are two or more linked transactions with the same effective date,
the purchaser, or all of the purchasers if there is more than one, may make a
single land transaction return as if all of those transactions that are notifiable
were a single notifiable transaction.

3) Where two or more purchasers make a single return in respect of linked

(a) the transactions in question were a single transaction; and

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6. You have been asked to take on a new private client, Beverley, who is a computer
programmer. She is presently working on a contract for MacroSoft, a company which
produces bespoke computer software. Beverley has been working on a specific project
for MacroSoft for six months and expects to be there for at least four more months. Her
contract with MacroSoft states that she is employed on a fixed-term contract.

You have a meeting set up with Beverley to discuss various issues, including her
employment status, as she is concerned that she may be incorrectly classified as
employed.

You are required to make notes for your meeting on:

1) The two types of working relationship and the distinction between them in
law.
2) The approaches used by the courts in determining employment status. (10)

7. Many businesses expand their reach by the use of agents, to minimise overheads
whilst still making their goods and services available to customers across a wide area.

1) You are required to describe the ways in which an agency relationship may
arise and an agency agreement can be terminated.

2) You are required to describe the duties of the agent and the principal and
indicate how the authority of an agent can arise. (15)

8. Bill owns 20% of the shares of Bilko Ltd with the remaining 80% of the shares owned
by four unrelated individuals, who each also have 20% of the shares.

Bill and his fellow shareholders are considering having a Shareholders’ Agreement
drafted and would like some information on Shareholders’ Agreements.

You are required to write a letter to Bill explaining the main provisions which
should be incorporated into the Shareholders’ Agreement and the limits to the
effectiveness of the Agreement. (15)

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