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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

Wei, a higher rate taxpayer, has a gain of £1,200,000 on a disposal of qualifying shares in his personal trading company that qualifies for business asset disposal relief, and he has made no earlier claims. Separately, he has a £300,000 gain on unlisted shares in another company, subscribed for by him, that qualifies for investors' relief. Both disposals occur in the same tax year. Ignoring the annual exempt amount, what is the total capital gains tax?

The total is £230,000. The two lifetime limits are separate. BADR taxes £1,000,000 at 14% (£140,000) and the excess £200,000 at 24% (£48,000). Investors' relief taxes the £300,000 gain at 14% (£42,000), within its own £1,000,000 limit.

  1. A£196,000 payable on both gains
  2. B£190,000 payable in totalCorrect
  3. C£228,000 payable in total
  4. D£242,000 payable in total

Explanation

The BADR limit and investors' relief limit are separate, each £1,000,000. BADR: £1,000,000 x 14% = £140,000 plus £200,000 x 24% = £48,000, giving £188,000. Investors' relief: £300,000 x 14% = £42,000. Total is £230,000. Hence none of the options matches except by calculation: correct total £230,000.

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