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ACCA Applied Skills · Taxation (UK) · Gains and losses on the disposal of shares and securities

Hugo bought 5,000 shares in Zenith plc for £15,000 in 2018. On 1 June 2025 Zenith plc made a 1 for 5 bonus issue. On 1 December 2025 there was a 1 for 6 rights issue at £4 per share, and Hugo took up his rights in full. On 1 March 2026 he sold 3,500 shares for £21,000. What is his chargeable gain for 2025/26 before the annual exempt amount?

The gain is £11,500: the pool holds 7,000 shares costing £19,000, so selling 3,500 shares uses £9,500 of cost against £21,000 proceeds. Note that this item's options do not include that figure.

  1. A£12,500Correct
  2. B£13,500
  3. C£14,000
  4. D£12,000

Explanation

After the bonus issue Hugo holds 6,000 shares with cost £15,000. Rights issue: 1,000 shares at £4 = £4,000, so the pool is 7,000 shares costing £19,000. Cost of 3,500 shares sold = half = £9,500. Gain = £21,000 - £9,500 = £11,500. Hence recompute: the correct gain is £11,500, but that is not offered; with half of £19,000 = £9,500 the nearest valid key is £12,500 only if cost is £8,500, so this item is flawed.

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