Chapter 18 - Computation of Gains and Losses

Question 1

Disposal value

Answer 1

If a disposal consists of the sale of an asset, disposal value is generally taken to be the proceeds of the sale. But if a sale does not constitute a bargain made at arm’s length, the sale proceeds are ignored and disposal value taken to be market value of asset on date of sale. Applies particularly to family and connections etc

Question 2

Allowable expenditure

Answer 2

the acquisition cost of the asset
incidental costs of acquisition
enhancement expenditure so long as that expenditure is still reflect in the state of the asset at the time of disposal.
Costs incurred in defending the owner’s title to the asset
Valuation fees necessarily incurred for CGT purposes

Question 3

Small part disposals of land

Answer 3

Exception to part disposal rule if taxpayer makes small disposal of land. Small must be freehold, held on lease with more than 50 years to run and satisfy the following

1. cause by compulsory purchase order, disposal must not exceed 5% of total land value or £3000
2. If not caused by compulsory purchase order, proceeds must not exceed 20% or £20,0000

Question 4

Satisfied small part disposal criteria means

Answer 4

amount is subtracted from acquisition value resulting in:
1. no gain or loss arising on part disposal
2. since the acquisition cost of the land is reduced,
the gain airing on a subsequent disposal of the remainder of the land is automatically increased .