The only chargeable asset of Sophia Wong’s business is goodwill and this is valued at £150,000. The goodwill has a nil cost.

Sophia will not make any other disposals during the tax year 2011–12. She has unused capital losses of £39,400 brought forward from the tax year 2010–11.

Required:
(i) State the capital gains tax consequences for the tax year 2011–12 if Sophia Wong transfers her business to a new limited company on 6 April 2011 in exchange for ordinary shares; (2 marks)

(ii) Explain why it would be beneficial if the consideration for the transfer of Sophia Wong’s business instead consisted of £50,000 in cash and £100,000 in £1 ordinary shares. (2 marks)