ACCA TX ^UK Syllabus C. Chargable Gains For Individuals - Entrepreneur's relief / Business asset disposal relief - Past Papers ^{1 / 2}

On  27  August  2014,  Ruby  disposed  of  an  investment  property,  and  this  resulted  in  a  chargeable  gain  of £45,800. 
In addition to the disposal already made on 27 August 2014, Ruby is going to make one further disposal during the tax year 2014–15. This disposal will be of either Ruby’s holding of £1 ordinary shares in Pola Ltd, or her holding of 50p ordinary shares in Aplo plc.

Shareholding in Pola Ltd
Pola Ltd is an unquoted trading company, in which Ruby has a 10% shareholding. The shareholding was purchased on 14 July 2007 for £23,700 and could be sold for £61,000. Ruby has been an employee of Pola Ltd since 2005.

Required:
Calculate Ruby’s revised capital gains tax liability for the tax year 2014–15 if, during March 2015, she also disposes of   her shareholding in Pola Ltd;  

Note: The following mark allocation is provided as guidance for this requirement:
Pola Ltd (4.5 marks)

You should assume that today’s date is 1 March 2013.

(c) Innocent and Nigel, a married couple, both have shareholdings in Cinnamon Ltd, an unquoted trading company with a share capital of 100,000 £1 ordinary shares.

Innocent has been the managing director of Cinnamon Ltd since the company’s incorporation on 1 July 2004, and she currently holds 20,000 shares (with matching voting rights) in the company. These shares were subscribed for on 1 July 2004 at their par value.

Nigel has never been an employee or a director of Cinnamon Ltd, and he currently holds 3,000 shares (with matching voting rights) in the company. These shares were purchased on 23 April 2008 for £46,200.

Either Innocent or Nigel will sell 2,000 of their shares in Cinnamon Ltd during March 2013 for £65,000, but are not sure which of them should make the disposal. For the tax year 2012–13, both Innocent and Nigel have already made disposals which will fully utilise their annual exempt amounts, and they will each have taxable income of £80,000.

Required:
Calculate the capital gains tax saving if the disposal of 2,000 shares in Cinnamon Ltd during March 2013 is made by Innocent rather than Nigel. (6 marks)

On 19 May 2011 Winston King disposed of a painting, and this resulted in a chargeable gain of £45,860. For the tax year 2011–12 Winston has taxable income of £22,400 after the deduction of the personal allowance.

Winston is considering the sale of a business that he has run as a sole trader since 1 July 2004. The business will be sold for £260,000, and this figure, along with the respective cost of each asset, is made up as follows:

The assets have all been owned for more than two years. The freehold warehouse has never been used by Winston for business purposes.

Where possible, Winston will claim entrepreneurs’ relief in respect of this disposal.

Required:
(ii) Calculate Winston King’s capital gains tax liability for the tax year 2011–12 if he sold his sole tradership business on 25 March 2012. (4 marks)