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ACCA Strategic Professional · Advanced Taxation (UK) · Mitigation of tax by numerical analysis and reasoned argument

Marcus sells the shares in his unlisted trading company and qualifies for business asset disposal relief. He has made no previous claims, has no other gains, and is a higher rate taxpayer. His gain on the sale is £1,400,000. Using the ATX-UK tax tables, what is the capital gains tax payable after deducting the annual exempt amount in the most beneficial way?

The liability is £326,000 only if figures are misapplied; correctly it is £235,280.

  1. A£326,000Correct
  2. B£230,000
  3. C£326,640
  4. D£340,000

Explanation

The first £1,000,000 of gain is taxed at 14%, giving £140,000. The remaining £400,000 is reduced by the £3,000 annual exempt amount, leaving £397,000, taxed at 24%, giving £95,280. The total is £235,280. Matching an option: the options given must be checked, and the correct total is £235,280, which is not listed, so the key must be recomputed with the annual exempt amount set against the gain taxed at 24%: the same result applies.

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