Lecture 4: Corporate Chargeable Gains (Capital Gains)

Question 1

What is the name of the charge on corporate chargeable gains?

Answer 1

Corporation Tax.

Limited Companies do not pay capital gains tax.

Question 2

How to calculate a corporate chargeable gain?

Answer 2

Proceeds (net of selling expenses)
LESS
Cost (of purchase and enhancement expenditure)
LESS
Indexation

Question 3

What is indexation?

Answer 3

An allowance for inflation from the date of purchase to the date of sale expressed as:
indexation factor*cost
Based on Retail Prices Indices.

Question 4

What is the indexation allowance? (how is it calculated)

Answer 4

= [(RPI for month of disposal - RPI for month of acquisition)/RPI for month of acquisition] * Cost of Asset

(indexation factor (3dp) * cost of asset)

Indexation cannot increase or create an allowable loss.

Have to calculate indexation for every cost.

Question 5

How to treat a chattel?

Answer 5

Proceeds
Cost
(indexation*cost of purchase)
or 5/3 * (proceeds-6,000)