Skip to content

ACCA Strategic Professional · Advanced Taxation (UK) · Capital gains tax: the basic principles of computing gains and losses

Grace, a UK resident individual, sold an antique vase (a non-wasting chattel) for £9,000 net of any selling costs. She had bought it for £3,000. Assuming the standard £6,000 chattel exemption limit applies, what is her chargeable gain before the annual exempt amount?

The chargeable gain is £5,000. Because proceeds of £9,000 exceed £6,000, the gain is limited to 5/3 of the excess of proceeds over £6,000, which is £5,000. This is lower than the ordinary gain of £6,000, so the restriction applies.

  1. A£6,000
  2. B£3,000
  3. C£0
  4. D£5,000Correct

Explanation

Proceeds exceed £6,000, so the gain is limited to 5/3 × (£9,000 - £6,000) = £5,000. The normal gain would be £6,000, which is higher, so the restriction applies. £3,000 wrongly uses just the excess of proceeds over £6,000 without the 5/3 multiplier.

Did you get it right without looking?

One question tells you little. A timed set on Capital gains tax: the basic principles of computing gains and losses shows your real accuracy, how long you take and where you lose marks.

Practise Capital gains tax: the basic principles of computing gains and lossesFree diagnostic mock

More Capital gains tax: the basic principles of computing gains and losses questions