chargeable gains

Question 1

chargeable gain

Answer 1

when a chargeable person disposes of a chargeable asset at a profit

Question 2

Chargeable gain calculation

Answer 2

proceeds

Less:

incidental selling costs

cost

incidental costs of acq

enhancement expenditure

= Unindexed gain

less indexation allowance

indexed gain

Question 3

Indexation allowance

Answer 3

(RPI Dec 2017 (or sale if earlier) - RPI at acq )/ RPI at Acq

rounded to 3dp

does not apply to disposal of shares acquired after 31 March 1985

Multiply cost by indexation factor

cannot create or increase capital loss

Question 4

Enhancement expenditure

Answer 4

expenditure which increases value of asset as reflected in nature of asset at disposal
allowable expenditure will be original cost of acq property + improvement and enhancement expenditure

Enhancement expenditure must be indexed seperately to the cost if the enhancement occurs at a different date to that of the acq of the asset

Question 5

Part disposals

Answer 5

start with proceeds then deduct cost of the asset being sold

take deduction for part of the original cost

A/(A+B) x cost

A = gross disposal proceeds (proceeds before any expenses deducted)
B = part retained

don’t forget indexation

With enhancement expenditure:
-if EE has increased value of whole asset, but only part sold, multiply expenditure by fraction

• if EE specifically incurred on part of the asset - deduct all EE

Question 6

Small part disposal of land

Answer 6

two conditions must be satisfied:
proceeds of disposal must be less than or equal to 20% of the value of land as at the date of disposal

total proceeds of all land sales in the year must not exceed £20,000

effect:

company will not pay CT on these proceeds - small proceeds ignored in gain calc

small proceeds will there after be deducted from the base cost of land in the event of future disposal

company must make claim within two years after end of AP in which small disposal made