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

Mei Lin, a UK resident individual, gifts a chargeable asset to her friend. The market value at the date of gift is £90,000, she paid £60,000 for it, and no relief for gifts applies. What is the gain she must compute for CGT purposes?

The gain is £30,000. A gift of a chargeable asset is a disposal, so proceeds are deemed to be market value of £90,000, and deducting the £60,000 cost gives the gain, before any annual exempt amount.

  1. ANil, because a gift is not a disposal
  2. B£30,000, using market value as the deemed proceedsCorrect
  3. C£60,000, using the original cost only
  4. D£90,000, using full market value as the gain

Explanation

A gift of a chargeable asset is a disposal for CGT. Proceeds are deemed to be market value, £90,000, less cost £60,000, giving a gain of £30,000 before the annual exempt amount. Option A is wrong because gifts are disposals.

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