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ACCA Strategic Professional · Advanced Taxation (UK) · Alternative ways of achieving personal or business outcomes and their tax consequences

Hana has made £1,000,000 of lifetime gains eligible for business asset disposal relief earlier, using her full limit. She now sells another qualifying business for a gain of £200,000. Using the rates in the tax tables, how is the new gain taxed, ignoring the annual exempt amount and assuming she is an additional rate taxpayer?

The gain is taxed at 24%. Business asset disposal relief has a £1,000,000 lifetime limit per individual, and once exhausted, further gains are taxed at the normal rates, which for a higher or additional rate taxpayer is 24%.

  1. AAt 14% because the relief applies to each separate business
  2. BAt 18% because she is above the limit
  3. CAt 24% because the lifetime limit is exhaustedCorrect
  4. DAt 14% on £100,000 and 24% on £100,000

Explanation

The lifetime limit for business asset disposal relief is £1,000,000. With it fully used, no further gain qualifies for the 14% rate, so the £200,000 is taxed at the higher rate of 24% as she is a higher-rate taxpayer. The limit is per individual, not per business, so the 14% option is wrong.

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