Capital Gains Tax Flashcards
A taxpayer is a shareholder of XYZ Ltd, a trading company. XYZ Ltd was incorporated in 2004 and the taxpayer has held her shares in XYZ Ltd since incorporation and has worked for the company since that time. The taxpayer owns 1500 of the 2000 shares in issue. She would like to sell 200 of her shares to her friend for £225,000.
All shares in XYZ Ltd are ordinary voting shares and all were issued in 2004 at £1.50 per share. All shares carry an entitlement to profits and assets available for distribution to shareholders on a winding up. The taxpayer did not incur any incidental acquisition costs. The legal fees for the taxpayer to transfer title in the shares to her friend have been estimated at £900.
What is the capital gains tax that would be payable onthis disposal? Ignore any other gains/losses the taxpayer may have made in the current, or any previous, tax year and consider any applicable relief.
A. £22, 380
B. £21,780
C. We cannot say as we do not know her income.
D. £21,810
E. £21,870
B.
The correct calculation is:
Consideration £225,000
Less costs of disposal (£900)
Net sale proceeds: £224,100
Less base cost 200 shares @ £1.50 (£300)
Total chargeable gain £223,800
Less AE (£6,000)
Taxable chargeable gain: £217,800
Taxed at 10% as TP would be entitled to Business Asset Disposal Relief = £21,780
