Chargeable Gains For Companies

Question 1

Calculation

Answer 1

Disposal consideration (Proceeds)

Less allowable costs

Unindexed gain

Less indexation allowance

Indexed gain

Question 2

Indexation allowance

Answer 2

Relief for inflation

Frozen at December 17 (last date you can use rate for )

Calculated as
RPI in month of disposal / December 17 (if disposed after) - RPI in month of expenditure/ RPI in month of expenditure

Or

RPI late -RPI early/ RPI early

Rounded to 3 DP

Cannot create or increase a loss

Chargeable gain = sum of gains and losses for that period less capital losses brought forward

Question 3

Capital losses

Answer 3

CY loss automatically offset against other gains in same accounting period

Any excess capital losses are C/F set against first available gains in following periods

Amount of B/F loss which can be offset against gains is subject to loss restriction

Question 4

Disposal of shares and securities

Answer 4

1) Any acquisitions made on the same day as the date of disposal (no indexation allowance
2) acquisitions within the previous 9 days, matching on FIFO (no indexation allowance )
3) any other shares S.104 :

Pool indexed up to each operative event (event occurs when acquisition and disposal fall in different months)

Indexed rise in this case not rounded to 3dp

Question 5

S.104 pool proforma

Question practice as impossible to write on flash card

Answer 5

Acquisition
IA to next Acq (not rounded)

Acquisition

Total
IA to next acquisition

Acquisition

IA to disposal/December 17

Disposal

The columns to the right are
No. Of Shares

Cost

Indexed cost (cost plus indexation)

Question 6

Bonus issue and rights issue (share disposal)

Answer 6

Bonus issue : free
-Increase number of shares, not cost (no need to index up to bonus issue)

-new bonus shares deemed to have been acquired on the same date as the original shares to which they relate

Rights issue : pay for (right to buy)
- increases number of shares and cost

• new shares deemed to be acquired on same day as shares They relate to
• no. Shares added to holdings and cost of the right share increases the cost of these holdings
• indexed rise in the pool is calculated

Question 7

Substantial shareholding exemption

Answer 7

If a company disposes of shares in a trading company (or holding company of a trading group) out of a substantial share holding :

Any capital gains arising is exempt from CT

Any capital loss is not allowable

Substantial shareholding =
TTST

Ten % holding (at least)
Twelve months (consecutive)
Six years (held preceding disposal )
Trading company