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ACCA Strategic Professional · Advanced Taxation (UK) · Capital gains tax: gains and losses on the disposal of shares and securities

Hana, a higher rate taxpayer, subscribed for 400,000 newly issued shares in an unquoted trading company, Orbit Ltd, at £2.50 each in 2021 (not via EIS). She holds under 10% and is not connected. She sold all of them in 2026/27 for a gain of £1,300,000, having used no prior investors' relief. Ignoring the annual exempt amount, which statement is correct if the shares were held for the required three years from 6 April 2016 but she was never an employee or officer?

The CGT is £212,000. Investors' relief applies to newly subscribed unquoted trading company shares held for the required period without needing employment, and is limited to £1,000,000 of gains taxed at 14%, giving £140,000. The remaining £300,000 is taxed at 24%, giving £72,000.

  1. AInvestors' relief applies to £1,000,000 of the gain at 14%, and the excess £300,000 is taxed at 24%, so total CGT is £212,000Correct
  2. BInvestors' relief is unavailable because she was never an officer, so tax is £312,000
  3. CInvestors' relief applies to the whole £1,300,000 at 14%, giving £182,000
  4. DInvestors' relief applies to £1,000,000 at 14% and the excess is taxed at 18%, giving £194,000

Explanation

Investors' relief does not require employment or office, unlike business asset disposal relief. £1,000,000 x 14% = £140,000. The excess £300,000 x 24% = £72,000. Total £212,000. Charging the whole gain at 14% ignores the £1,000,000 lifetime limit.

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