Section B: Q17

Specimen exam

Q17 Section B

2 marks

Delroy and Grant
On 10 January 2019, Delroy made a gift of 25,000 £1 ordinary shares in Dub Ltd, an unquoted trading company, to his son, Grant.

The market value of the shares on that date was £240,000.

Delroy had subscribed for the 25,000 shares in Dub Ltd at par on 1 July 2006.

Delroy and Grant have elected to hold over the gain as a gift of a business asset.

Grant sold the 25,000 shares in Dub Ltd on 18 March 2019 for £240,000.

Dub Ltd has a share capital of 100,000 £1 ordinary shares. Delroy was the sales director of the company from its incorporation on 1 July 2006 until 10 January 2019.

Grant has never been an employee or a director of Dub Ltd.

For the tax year 2018-19, Delroy and Grant are both higher rate taxpayers.

They have each made other disposals of assets during the tax year 2018-19, and therefore they have both already utilised their annual exempt amount for this year.

Marlon and Alvita
On 28 March 2019, Marlon sold a residential property for £497,000, which he had owned individually.

The property had been purchased on 22 October 2001 for £152,600.

Throughout the period of ownership, the property was occupied by Marlon and his wife, Alvita, as their main residence.

One-third of the property was always used exclusively for business purposes by the couple.

Entrepreneurs’ relief is not available in respect of this disposal.

For the tax year 2018-19, Marlon is a higher rate taxpayer, but Alvita did not have any taxable income.

This will remain the case for the tax year 2019-20.

Neither of them has made any other disposals of assets during the year.

Which TWO of the following statements would have been true in relation to the CGT implications if Delroy had instead sold the 25,000 shares in Dub Ltd himself for £240,000 on 10 January 2019, and then gifted the cash proceeds to Grant?

Pick 2 options