Charlotte is the owner of Bamburg Ltd. She requires advice on the sale of a substantial item of machinery.

Charlotte:
– Is UK resident and UK domiciled.
– Owns 100% of the ordinary share capital of Bamburg Ltd.

Bamburg Ltd:
– Is a UK resident trading company which pays corporation tax at the small profits rate.
– Is registered for VAT.
– Has budgeted sales revenue for the year ending 31 March 2015 of £120,000 excluding VAT.
– Makes wholly standard rated supplies apart from £6,000 of exempt supplies.
– Has a nil tax written down value on its main pool as at 31 March 2014.
– Will not purchase any plant and machinery in the year ending 31 March 2015.

The ‘Cara’ machine:
– Was purchased on 1 January 2012 for £94,000.
– Rollover relief was claimed in respect of this purchase to defer a chargeable gain of £13,000.
– The ‘Cara’ machine is currently worth £80,000.
– Following the sale of the ‘Cara’ machine, Bamburg Ltd will rent a replacement machine.

Required:
(b) Explain the tax and financial implications of Bamburg Ltd selling the ‘Cara’ machine during the year ending 31 March 2015. (5 marks)