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

Tomas owns 2,000 ordinary shares in Karran plc, which form a section 104 pool with a total cost of £8,000. Karran makes a 1 for 2 rights issue at £3 per share, and Tomas takes up all his rights in full. He later sells 1,200 shares from the enlarged holding for £6,000. What is his chargeable gain on this disposal, before the annual exempt amount?

The taken-up rights shares are added to the existing pool, so the pool is 3,000 shares costing £11,000. The 1,200 shares sold carry cost of £4,400, giving a gain of £1,600 against proceeds of £6,000. Ignoring the £3,000 rights cost would overstate the gain.

  1. A£2,800
  2. B£1,200
  3. C£2,400
  4. D£1,600Correct

Explanation

Rights shares taken up: 1,000 shares at £3 = £3,000. The pool becomes 3,000 shares with cost £11,000. Cost of the 1,200 shares sold = 1,200/3,000 × £11,000 = £4,400, so the gain is £6,000 − £4,400 = £1,600. £2,800 ignores the rights cost, and £1,200 uses only the pre-rights 2,000 shares and £8,000 cost.

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