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ACCA Strategic Professional · Advanced Taxation (UK)

Capital Gains Tax on Disposals of Movable and Immovable Property

Capital gains tax charges tax on gains when you dispose of chargeable assets. In ATX-UK you compute the gain (proceeds less cost and costs of disposal), deduct losses and the annual exempt amount, apply reliefs, then tax at 18% or 24%. For gains qualifying for business asset disposal relief, the rate is 14%.

What this chapter covers

This chapter covers how the UK taxes gains on assets such as land, buildings, shares, chattels and business assets. You start with the basic computation and the rates in the tax tables. Then you add the special rules: chattels, wasting assets, part disposals and the main reliefs.

The reliefs are where ATX-UK questions get demanding. You must decide whether business asset disposal relief, investors' relief, gift holdover relief, rollover relief or incorporation relief applies. You must also say what conditions are met, and what happens to the base cost or the gain. Share matching rules and residential property rules sit alongside these.

This chapter links to much of the rest of the paper. Capital allowances affect the cost and the gain on property. Stamp taxes and inheritance tax can arise on the same transfer. Section A case studies often mix CGT with income tax, corporation tax, IHT and VAT, so you need to see the whole picture and give advice, not only a calculation.

CGT is a core area for ATX-UK, and it shows up in both Section A and Section B in many forms. Marks come from correct figures, but also from stating conditions, choosing between reliefs and advising on the best course of action. These advisory points are rewarded as part of the 20 professional skills marks and the technical marks. A student who knows the rules well can pick up marks quickly, because many steps in a CGT answer are standard and easy to score.

Capital gains tax: gains and losses on the disposal of movable and immovable property: topics in the order to study them

  1. 1CGT Rates, Annual Exempt Amount and Computation of GainsEvery other topic builds on the basic computation, the 18% and 24% rates and the £3,000 annual exempt amount.
  2. 2Chattels, Wasting Assets and Part DisposalsThese are special computation rules that change how you work out the gain, so learn them right after the basics.
  3. 3Disposal of Shares, Share Reorganisations and Matching RulesShare disposals are frequent in the exam and need a fixed method, so practise them early while the basic computation is fresh.
  4. 4Business Asset Disposal Relief and Investors' ReliefThese reliefs reduce the rate to 14% within a £1,000,000 lifetime limit, and you need the share and business rules first.
  5. 5Gift Holdover Relief, Rollover Relief and Incorporation ReliefThese deferral reliefs need the most conditions, so study them once you know the basic gain and the rate-reducing reliefs.
  6. 6Residential Property, Private Residence Relief and ReportingProperty gains bring in occupation periods, deemed occupation and reporting deadlines, which are easier after the general reliefs.
  7. 7Capital Allowances, Stamp Taxes and IHT Interaction on PropertyThis topic pulls the chapter together by showing how other taxes affect the same property, so study it last.

How to prepare Capital gains tax: gains and losses on the disposal of movable and immovable property

Work in layers. Master the basic computation first, then add one rule or relief at a time, and always finish by practising written advice.

  1. Learn the layout of a CGT computation and use it every time, with proceeds, allowable costs, gain, losses, annual exempt amount, then tax.
  2. Memorise how the tax tables help you, and practise looking up the rates, the £3,000 annual exempt amount and the £1,000,000 relief limits quickly.
  3. For each relief, write a short list of conditions and what the relief does to the gain or to the base cost. Test yourself from memory.
  4. Do share matching questions step by step: same day, then the next 30 days, then the share pool.
  5. Practise past-style Section A and Section B questions under time pressure, and write short advice points that apply to the facts given.
  6. Practise when two reliefs could apply to the same gain. Compare the tax result of each and explain your recommendation.
  7. Keep a one-page note of dates, reporting deadlines and common conditions, and review it often on your phone.

Common mistakes in Capital gains tax: gains and losses on the disposal of movable and immovable property

  • Applying a relief without checking all its conditions.

    Fix: Write the conditions as a short checklist for each relief and tick them off against the facts in the question.

  • Using the wrong CGT rate, or applying 14% to gains that do not qualify.

    Fix: Decide first whether a relief applies, then work out the taxpayer's income tax position and use the correct rate from the tax tables.

  • Getting the share matching order wrong.

    Fix: Always match in the fixed order and set out each match in a separate working.

  • Giving only numbers and no advice.

    Fix: Add a sentence or two on what the figure means, what the options are and what you recommend, as professional skills marks depend on this.

  • Forgetting the effect of one relief on the base cost or on another relief.

    Fix: After any deferral relief, write down the new base cost straight away and carry it forward.

  • Ignoring other taxes on the same property transaction.

    Fix: For each property question, ask what else the transaction triggers, and list those taxes briefly in your answer.

Last-day revision: Capital gains tax: gains and losses on the disposal of movable and immovable property

  • CGT rates in the tables are 18% (lower) and 24% (higher), and the annual exempt amount is £3,000.
  • Gain = proceeds less allowable cost and costs of disposal, and then less losses and the annual exempt amount.
  • Business asset disposal relief and investors' relief both have a £1,000,000 lifetime limit, and the rate on qualifying gains is 14%.
  • Gift holdover relief and rollover relief defer a gain, and they work by adjusting the base cost of the new or gifted asset.
  • Incorporation relief defers the gain on transfer of a business to a company, and it reduces the base cost of the shares.
  • Share disposals are matched in order: same day, then the next 30 days, then the share pool.
  • Check the conditions for every relief before you apply it, and state them in your answer.
  • Private residence relief depends on periods of occupation and deemed occupation, so check the facts for each period.
  • Capital allowances affect the cost and tax position of property, so check them when a building or plant is sold.
  • Stamp duty on shares is 0.5%, and stamp duty land tax on non-residential property is 0%, 2% and 5% by band.
  • Inheritance tax can apply to a gift as well as CGT, so consider both when a gift is made.
  • Show all workings and state your assumptions clearly.

Capital gains tax: gains and losses on the disposal of movable and immovable property practice questions

Capital gains tax: gains and losses on the disposal of movable and immovable property in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Capital gains tax: gains and losses on the disposal of movable and immovable property: frequently asked questions

What CGT rates do I use in ATX-UK?

The tax tables give a lower rate of 18% and a higher rate of 24%. Gains that qualify for business asset disposal relief or investors' relief are taxed at 14%. The annual exempt amount is £3,000.

Do I get the tax rates in the exam?

Yes. ACCA reproduces the tax rates and allowances in the ATX-UK exam. You still need to know how to use them and what conditions apply, so practise with the tables.

How is this chapter tested?

It can appear in the Section A case study or in Section B questions. Expect a mix of calculations and written advice, often combined with other taxes. Answer the requirement, apply it to the facts and show your professional skills.

Which relief should I choose when more than one is available?

Compare the tax result of each option and consider timing and conditions. Then explain your recommendation in plain words. The marks come from both the numbers and the reasoning.