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ACCA Applied Skills · Taxation (UK) · Gains and losses on the disposal of movable and immovable property

Tomas, a higher rate taxpayer, sold his business and made a gain of £300,000 that qualifies for business asset disposal relief. He has no other gains or losses. In earlier years he had already claimed the relief on gains totalling £880,000. His £3,000 annual exempt amount is available and should be used to minimise tax. What is his capital gains tax liability?

The liability is £59,280. Only £120,000 of the lifetime limit remains, so that part of the gain is taxed at 14%, giving £16,800. The remaining £180,000 is taxed at 24% after deducting the £3,000 annual exempt amount, giving £42,480. The two amounts total £59,280.

  1. A£59,280Correct
  2. B£59,580
  3. C£60,000
  4. D£41,580

Explanation

Only £120,000 of the lifetime limit remains (£1,000,000 less £880,000), so £120,000 is taxed at 14% = £16,800. The excess of £180,000 is taxed at 24%. The annual exempt amount is best set against this excess, so £177,000 × 24% = £42,480. Total = £59,280. £59,580 uses the exemption against the 14% gain. £60,000 ignores the exemption. £41,580 ignores the limit.

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