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ACCA Strategic Professional · Advanced Taxation (UK) · Investment and other expenditure that reduces tax liabilities

Tomasz made a £1,000,000 gain on a qualifying business disposal in an earlier year and claimed BADR on all of it. He now sells qualifying shares subscribed for in an unlisted company and makes a gain of £600,000 that meets all the conditions for Investors' Relief. He has claimed no Investors' Relief before, is a higher rate taxpayer and his annual exempt amount is used. What is the CGT on this gain?

The earlier BADR claim does not use up the separate £1,000,000 investors' relief limit, so the full £600,000 gain is taxed at 14%, giving £84,000. Taxing it at 24% would give £144,000, which wrongly assumes a shared limit.

  1. A£144,000
  2. B£84,000Correct
  3. C£108,000
  4. D£60,000

Explanation

Investors' relief has its own £1,000,000 limit, so the BADR used earlier does not reduce it. The whole £600,000 qualifies at 14%: £600,000 x 14% = £84,000. £144,000 wrongly ignores the relief by using 24%. Treating the limit as exhausted by the previous BADR claim leads to that mistake.

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