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ACCA Strategic Professional · Advanced Taxation (UK) · Capital gains tax: the scope of the taxation of capital gains

Tomasz, a higher rate taxpayer, sold two assets in the current tax year: shares realising a chargeable gain of £15,000 and a painting realising an allowable loss of £9,000. He also has a net capital loss of £4,000 brought forward from an earlier year. What is the amount of his gains charged to capital gains tax, using the annual exempt amount in the ATX-UK tax tables?

Nothing is charged. Current year losses are set against current gains to give £6,000, then brought forward losses are used only to reduce gains to the £3,000 annual exempt amount. That uses £3,000 of the loss, leaving £3,000 covered by the exemption, so taxable gains are nil.

  1. A£0Correct
  2. B£3,000
  3. C£6,000
  4. D£2,000

Explanation

Wrong ordering matters. Current year: £15,000 - £9,000 = £6,000 net gain. Brought forward losses are only used to reduce gains down to the annual exempt amount: £6,000 - £3,000 = £3,000 of loss used, leaving £3,000 taxable? Brought forward loss £4,000 is used only to extent needed, so £3,000 is used, taxable gain is £3,000 less... correct result: net gain £6,000, relief of £3,000 b/f loss reduces to £3,000 which is covered by the AEA, so taxable amount is nil.

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