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ACCA Strategic Professional · Advanced Taxation (UK) · Corporation tax: the comprehensive calculation of the corporation tax liability, including overseas aspects

Zenith Ltd, a UK trading company, sells a freehold warehouse used in its trade and realises a chargeable gain of £120,000. Which statement correctly describes how this gain is taxed?

A company's chargeable gain is added to its taxable total profits and charged to corporation tax. No annual exempt amount is available to companies, and individual CGT rates and business asset disposal relief do not apply to a company disposal.

  1. AThe gain is included in Zenith Ltd's taxable total profits and taxed at the corporation tax rates, with no annual exempt amount availableCorrect
  2. BThe gain is taxed at the capital gains tax rate of 24% with the £3,000 annual exempt amount deducted
  3. CThe gain is taxed at 14% as the company can claim business asset disposal relief
  4. DThe gain is exempt because the warehouse was used in the company's trade

Explanation

A company does not pay capital gains tax. Its chargeable gains are included in taxable total profits and charged to corporation tax at the applicable rate. Companies have no annual exempt amount, and business asset disposal relief is only available to individuals, so the CGT rates and the 14% rate do not apply.

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