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ACCA Strategic Professional · Advanced Taxation (UK) · Capital gains tax: the use of exemptions and reliefs in deferring and minimising tax liabilities

Tomas sells a qualifying business and makes a gain of £400,000 that qualifies in full for business asset disposal relief. He has made no previous claims and has no other gains. His annual exempt amount is £3,000 and he is a higher rate taxpayer. Using the ATX-UK tax tables, what is his CGT liability, assuming the annual exempt amount is set against the gain in the most beneficial way?

His CGT is £55,580. The whole gain falls within the £1,000,000 business asset disposal relief lifetime limit so it is taxed at 14%, and after deducting the £3,000 annual exempt amount the taxable gain is £397,000, giving £55,580.

  1. A£56,000
  2. B£55,580Correct
  3. C£95,280
  4. D£96,000

Explanation

The gain is within the £1,000,000 lifetime limit, so the relief rate in the tables applies. The annual exempt amount is offset against the gain at the same rate: £400,000 - £3,000 = £397,000. Tax at 14% is £55,580. £56,000 ignores the exempt amount. £96,000 and £95,280 use 24%.

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