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

Tomas bought 4,000 shares in Zed plc for £8,000 in total, forming his only holding. Zed plc made a 1 for 4 rights issue at £3.00 per share, and Tomas took up all his rights. He later sold 2,000 shares for £10,000. What is his capital gain before the annual exempt amount?

The rights shares join the pool at the price paid. The pool is 5,000 shares costing £11,000. Selling 2,000 shares uses cost of £4,400, so the gain on £10,000 proceeds is £5,600 before the annual exempt amount.

  1. A£6,800
  2. B£5,600Correct
  3. C£6,000
  4. D£2,600

Explanation

The pool is 4,000 shares costing £8,000 plus 1,000 rights shares costing £3,000, giving 5,000 shares costing £11,000. Cost of the 2,000 shares sold is 2,000/5,000 × £11,000 = £4,400, so the gain is £10,000 − £4,400 = £5,600. £6,800 ignores the rights cost, and £2,600 is the gain after deducting the £3,000 annual exempt amount.

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