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

Ms Grant bought 10,000 shares in Delta Ltd for £20,000. Epsilon plc takes over Delta Ltd and Ms Grant receives 5,000 Epsilon plc shares worth £60,000 plus £20,000 cash, a total value of £80,000. The takeover is for bona fide commercial reasons and the cash is not a small amount. Assuming the cash is not small, what is her chargeable gain on the cash element in this tax year, before the annual exempt amount?

The chargeable gain is £15,000. The cash is a part disposal, so cost of £20,000 is apportioned by cash over cash plus shares value, giving £5,000. Deducting this from the £20,000 cash gives £15,000. The remaining gain on the shares is rolled over into the new holding.

  1. A£15,000Correct
  2. B£60,000
  3. C£20,000
  4. D£0

Explanation

Where cash is received as well as shares and is not small, there is a part disposal using the A/(A+B) apportionment. Cost allocated = £20,000 × 20,000/(20,000+60,000) = £5,000. Gain = £20,000 − £5,000 = £15,000. The £20,000 option ignores the cost allocation.

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