Test your understanding: answers
(1). C The set-off of the brought forward capital losses is restricted to £11,600 (22,500 – 10,900) so that chargeable gains are reduced to the amount of the annual exempt amount. Som therefore has unused capital losses of £14,500 (26,100 – 11,600) carried forward to 2014-15.
(2). A Alistair has £3,810 (32,010 – 28,200) of his basic rate tax band unused. The CGT liability in respect of the taxable gain of £21,700 (32,600 – 10,900) is £5,695 ((3,810 at 18%) + (17,890 at 28%)).
(3). D The cost relating to the five acres of land sold is £43,520 (68,000 x 72,000/112,500 (72,000 + 40,500)).
(4). A The chargeable gain is restricted to £11,333 (6,800 (12,800 – 6,000) x 5/3) as this is less than the normal gain of £11,500 (12,800 – 1,300).
(5). C The shares in AMZ plc are valued at the lower of the quarter up price of £10.31 (£10.20 + ¼(£10.64 – £10.20) = £5.12) and £10.30 being the average of the days highest and lowest bargains ((£9.80 + £10.80)/2).
(6). C The reinvestment must take place between one year before and three years after the date of disposal.
(7). D The indexation factor is 0.651 ((260.0 – 157.5)/157.5)), so the indexed cost is £188,214 (114,000 + (114,000 x 0.651)). Dash Ltd’s chargeable gain is therefore £71,786 (260,000 – 188,214).