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ACCA Applied Skills · Taxation (UK) · Gains and losses on the disposal of movable and immovable property

Daniel, a UK resident individual, sold a freehold investment property in the tax year 2026/27 for £260,000. He bought it for £180,000 and paid legal fees of £2,500 on purchase. He paid auctioneer's fees of £4,500 on the sale and spent £12,000 on a new extension that is still reflected in the property's state at sale. He also spent £6,000 on redecorating, which was an ordinary repair. What is Daniel's chargeable gain before the annual exempt amount?

The chargeable gain is £61,000. Net proceeds of £255,500 after selling costs are reduced by the purchase price, purchase fees and the capital extension, totalling £194,500. Redecoration is ordinary repair expenditure, not capital enhancement, so it is not deductible in computing the gain.

  1. A£61,000Correct
  2. B£55,000
  3. C£65,500
  4. D£80,000

Explanation

Proceeds £260,000 less selling costs £4,500 = £255,500 net. Allowable costs are purchase £180,000, purchase legal fees £2,500 and enhancement £12,000 = £194,500. Gain = £255,500 - £194,500 = £61,000. The £6,000 redecoration is revenue expenditure and is not allowable, so deducting it gives £55,000, which is wrong.

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