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Adv Tax NI

Session 4

Corporation tax

Online Revision Bridging Course

Contents1) Corporation tax computation2) Capital allowances3) Chargeable gains

2

Corporation tax computationTaxable profits:

3

Proforma Computation £ £Net Profit per accounts XAddback:Expenditure not allowable for tax purposes X

XLess:Income not taxed as trading income (X)Allowable expenditure not charged in the accounts (X)Capital Allowances (X)

(X)Tax Adjusted Trading Profits X

Template

Proforma Computation££

Tax Adjusted Trading IncomeX

Less: Trading Losses b/fX

X

Interest IncomeX

Income from Foreign PossessionsX

Miscellaneous IncomeX

Rental IncomeX

X

Chargeable GainsX

Less: Allowable Capital Losses b/f(X)

X

Less:

Rental losses(X)

Current year trading losses(X)

Losses carried back(X)

Deficits on non-trading loans(X)

Qualifying Charitable Donations(X)

(X)

Profits Chargeable to Corporation Tax (PCTCT)X


Net Profit per accountsX

Addback:

Expenditure not allowable for tax purposesX

X

Less:

Income not taxed as trading income(X)

Allowable expenditure not charged in the accounts(X)

Capital Allowances(X)

(X)

Tax Adjusted Trading ProfitsX

Melville Template

££

Trading incomexx

Less: Trading losses brought forwardxxxx

Income from propertyxx

Income from non-trading loan relationshipsxx

Non-trading income from intangible fixed assetsxx

Chargeable gainsxx

Less: Allowable capital lossesxxxx

xx

Less: Property business lossesxx

Deficits on non-trading loan relationshipsxx

Trading losses relieved against total profitsxx

Relief for qualifying charitable donationsxxxx

Total taxable profits (TTP)xx

Chargeable gain calculation:

Disposal proceeds£X

Less incidental costs of disposal(£X)

Net proceeds£X

Less Allowable Expenditure

Acquisition cost(£X)

Incidental costs of acquisition(£X)

Ehancement expenditure(£X)(£X)

Chargeable Gain(£X)

CGT Liability

Gain on disposal of business12,500,000ER max10,000,000

Less: Annual exemption(11,100)Used900,000

Taxable gains12,488,900Left9,100,000

9,100,000 @ 10% (10,000,000 - 900,000)910,0003,388,900

3,388,900 @ 20% (12,488,900 - 9,100,000)677,780

Total CGT liability1,587,780

Eg 2

Trading profits

Melville Page 342 example 2

££

Turnover1,640,430

Cost of sales(827,390)

Gross profit813,040

Other income24,000

837,040

Distribtion costs(187,770)

Administrative expenses(341,920)(529,690)

Profit before tax307,350

Notes

1The other income of 24,000 consists of rents receivable.24,000

2Distribution costs are as follows:£

Depreciation of distribution vans18,530

Loss on disposal of distribution van990

General distribution costs (all allowable)168,250

187,770

3Administrative expenses are as follows:£

Depreciation of office equipment12,680

Profit on disposal of office equipment(3,710)

Loss on disposal of investments27,000

Trade debts written off10,600

Increase in general allowance for doubtful debts8,400

Customer entertaining2,760

Staff entertaining5,550

Gift Aid donations10,000

Legal fees re acquisition of new freehold offices4,500

Motor exps (½ private motoring by employees)59,060

Patent royalties payable for trade purposes20,000

Embezzlement by director50,000

General administrative exps (all allowable)135,080

341,920

Solution

££

Profit per accounts307,350

LessNon-trading income

Income from property(24,000)

Profit on disposal of office equipment(3,710)(27,710)

279,640

AddDisallowable expenses









Embezzlement by director50,000134,860

Trading income (before capital allowances)414,500

Eg 7

17/18 version

Long periods of accountLong periods of account

Melville Page 352 example 3Melville Page 352 example 3Included in lecture12/31/169/30/17

1617

££

Adjusted trading profits (before capital allowances)630,000Adjusted trading profits (before capital allowances)630,000

Non-trade loan interest receivableNon-trade loan interest receivable

Received 31 October 2015600Received 31 October 2016600

Received 30 April 2016600Received 30 April 2017600

Accrued to 30 September 2016500Accrued to 30 September 2017500

Chargeable gainsChargeable gains

Disposal on 25 May 20152,300Disposal on 25 May 20162,300

Disposal on 12 December 2015700Disposal on 12 December 2016700

Disposal on 15 February 201610,500Disposal on 15 February 201710,500

Gift Aid donationsGift Aid donations

Paid 31 December 20154,000Paid 31 December 20164,000

Accrued to 30 September 20163,000Accrued to 30 September 20173,000

The loan interest receivable relates to a £12,000 loan made on812000The loan interest receivable relates to a £12,000 loan made on812000

on 1 May 2015 at 10%10%on 1 May 2016 at 10%10%

The company makes a £4,000 Gift Aid donation on 31 DecemberThe company makes a £4,000 Gift Aid donation on 31 December

every year.every year.

Show how the period of account will be divided into accounting periodsShow how the period of account will be divided into accounting periods

and compute the company's taxable total profits for each accounting and compute the company's taxable total profits for each accounting

period (ignore capital allowances).period (ignore capital allowances).

129129

SolutionSolution

12 months to 31/12/159 months to 30/9/1612 months to 31/12/169 months to 30/09/17

££££

Trading income (12:9)360,000270,000Trading income (12:9)360,000270,000

Income from non-trading relationship800900Income from non-trading relationship800900

Chargeable gains3,00010,500Chargeable gains3,00010,500

363,800281,400363,800281,400

Less:Qualifying charitable donations(4,000)nilLess:Qualifying charitable donations(4,000)nil

Taxable total profits (TTP)359,800281,400Taxable total profits (TTP)359,800281,400

Q 23.5

This was used in VC5 - Corp Tax 1.pptx on 13 Dec 2016.17/18 Version - going to ram it into lecture 1.

Trading profitsTrading profits1718

Melville Page 357 Exercise 23.5PositionMelville Page 357 Exercise 23.5

A company has the following results for the year to 31 March 2017:1.5cmA company has the following results for the year to 31 March 2018:

££6cm££

Trading profits, after capital allowances1,561,400120%Trading profits, after capital allowances1,561,400

Bank deposit interest (account opened 1 April 2016)Bank deposit interest (account opened 1 April 2017)

Received 30 June 20161,820 Received 30 June 20171,820

Received 31 December 20163,670 Received 31 December 20173,670

Accrued to 31 March 20171,980 Accrued to 31 March 20181,980

Chargeable gain on sale of factory531,000Chargeable gain on sale of factory531,000

Dividends received from UK companies132,000Dividends received from UK companies132,000

Deed of covenant paybable annually to a charity:Deed of covenant paybable annually to a charity:

Paid 1 October 2016, for the year to 30 Sept 20179,000 Paid 1 October 2017, for the year to 30 Sept 20189,000

Less: Prepayment4,5004,500 Less: Prepayment4,5004,500

The charitable covenant began on 1 October 2016 and falls within the GiftThe charitable covenant began on 1 October 2017 and falls within the Gift

Aid scheme.Aid scheme.

Compute the taxable profits for the year.Compute the taxable profits for the year to 31 March 2018.

SolutionP575SolutionP575

The taxable total profits for the year to 31 March 2017 are as follows:The taxable total profits for the year to 31 March 2018 are as follows:

££

Trading income1,561,400Trading income1,561,400

Income from non-trading loan relationshipsIncome from non-trading loan relationships

(£1,820 + £3,670 + £1,980)7,470 (£1,820 + £3,670 + £1,980)7,470

Chargeable gains531,000Chargeable gains531,000

2,099,8702,099,870

Less: Qualifying charitable donations9,000Less: Qualifying charitable donations9,000

Taxable Total Profits2,090,870Taxable Total Profits2,090,870

Notes:Notes:

a)Interest receivable is taxed on the accruals basis.a)Interest receivable is taxed on the accruals basis.

b)Dividends received do not form part of a company's taxable totalb)Dividends received do not form part of a company's taxable total

profits.profits.

c)Gift Aid donations are relieved on the payments basis.c)Gift Aid donations are relieved on the payments basis.

Corporation tax computationProfits Subject to Corporation Tax (PCTCT):

4

Proforma Computation £ £Tax Adjusted Trading Income XLess: Trading Losses b/f (Pre 1 April 2017) X

XInterest Income XIncome from Foreign Possessions XMiscellaneous Income XRental Income X

XChargeable Gains XLess: Allowable Capital Losses b/f (X)

XLess:Rental losses (X)Current year trading losses (X)Post April 2017 losses b/f (X)Losses carried back (X)Deficits on non-trading loans (X)Qualifying Charitable Donations (X)

(X)Profits Chargeable to Corporation Tax (PCTCT) X

These can only be set against trading income.

These can be set against any income.

Template


Tax Adjusted Trading IncomeX

Less: Trading Losses b/f (Pre 1 April 2017)X

X

Interest IncomeX

Income from Foreign PossessionsX

Miscellaneous IncomeX

Rental IncomeX

X

Chargeable GainsX

Less: Allowable Capital Losses b/f(X)

X

Less:

Rental losses(X)


Post April 2017 losses b/f(X)



Qualifying Charitable Donations(X)

(X)

Profits Chargeable to Corporation Tax (PCTCT)X


Net Profit per accountsX

Addback:

Expenditure not allowable for tax purposesX

X

Less:

Income not taxed as trading income(X)

Allowable expenditure not charged in the acccounts(X)

Capital Allowances(X)

(X)

Tax Adjusted Trading Profits

Melville Template

££

Trading incomexx

Less: Trading losses brought forwardxxxx

Income from propertyxx

Income from non-trading loan relationshipsxx

Non-trading income from intangible fixed assetsxx

Chargeable gainsxx

Less: Allowable capital lossesxxxx

xx

Less: Property business lossesxx

Deficits on non-trading loan relationshipsxx

Trading losses relieved against total profitsxx

Relief for qualifying charitable donationsxxxx

Total taxable profits (TTP)xx




Net proceeds£X






CGT Liability

Gain on disposal of business12,500,000ER max10,000,000

Less: Annual exemption(11,100)Used900,000

Taxable gains12,488,900Left9,100,000

9,100,000 @ 10% (10,000,000 - 900,000)910,0003,388,900

3,388,900 @ 20% (12,488,900 - 9,100,000)677,780

Total CGT liability1,587,780

Eg 2

Trading profits


££

Turnover1,640,430

Cost of sales(827,390)

Gross profit813,040

Other income24,000

837,040

Distribution costs(187,770)

Administrative expenses(341,920)(529,690)

Profit before tax307,350

Notes

1The other income of 24,000 consists of rents receivable.24,000

2Distribution costs are as follows:£



General distribution costs (all allowable)168,250

187,770

3Administrative expenses are as follows:£


Profit on disposal of office equipment(3,710)


Trade debts written off10,600



Staff entertaining5,550



Motor exps (½ private motoring by employees)59,060

Patent royalties payable for trade purposes20,000

Embezzlement by director50,000

General administrative exps (all allowable)135,080

341,920

Solution

££

Profit per accounts307,350

LessNon-trading income

Income from property(24,000)

Profit on disposal of office equipment(3,710)(27,710)

279,640

AddDisallowable expenses









Embezzlement by director50,000134,860

Trading income (before capital allowances)414,500

Eg 7

17/18 version18/19 version

Long periods of accountLong periods of accountLong periods of account

Melville Page 352 example 3Melville Page 352 example 3Included in lecture12/31/169/30/17Melville Page 352 example 3Included in Advanced Tax NI Revision June 201812/31/179/30/18

16171718

£££

Adjusted trading profits (before capital allowances)630,000Adjusted trading profits (before capital allowances)630,000Adjusted trading profits (before capital allowances)630,000

Non-trade loan interest receivableNon-trade loan interest receivableNon-trade loan interest receivable

Received 31 October 2015600Received 31 October 2016600Received 31 October 2017600

Received 30 April 2016600Received 30 April 2017600Received 30 April 2018600

Accrued to 30 September 2016500Accrued to 30 September 2017500Accrued to 30 September 2018500

Chargeable gainsChargeable gainsChargeable gains

Disposal on 25 May 20152,300Disposal on 25 May 20162,300Disposal on 25 May 20172,300

Disposal on 12 December 2015700Disposal on 12 December 2016700Disposal on 12 December 2017700

Disposal on 15 February 201610,500Disposal on 15 February 201710,500Disposal on 15 February 201810,500

Gift Aid donationsGift Aid donationsGift Aid donations

Paid 31 December 20154,000Paid 31 December 20164,000Paid 31 December 20174,000

Accrued to 30 September 20163,000Accrued to 30 September 20173,000Accrued to 30 September 20183,000

The loan interest receivable relates to a £12,000 loan made on812000The loan interest receivable relates to a £12,000 loan made on812000The loan interest receivable relates to a £12,000 loan made on812000

on 1 May 2015 at 10%10%on 1 May 2016 at 10%10%on 1 May 2017 at 10%10%

The company makes a £4,000 Gift Aid donation on 31 DecemberThe company makes a £4,000 Gift Aid donation on 31 DecemberThe company makes a £4,000 Gift Aid donation on 31 December

every year.every year.every year.

Show how the period of account will be divided into accounting periodsShow how the period of account will be divided into accounting periodsShow how the period of account will be divided into accounting periods

and compute the company's taxable total profits for each accounting and compute the company's taxable total profits for each accounting and compute the company's taxable total profits for each accounting

period (ignore capital allowances).period (ignore capital allowances).period (ignore capital allowances).

129129129

SolutionSolutionSolution

12 months to 31/12/159 months to 30/9/1612 months to 31/12/169 months to 30/09/1712 months to 31/12/179 months to 30/09/18

££££££

Trading income (12:9)360,000270,000Trading income (12:9)360,000270,000Trading income (12:9)360,000270,000

Income from non-trading relationship800900Income from non-trading relationship800900Income from non-trading relationship800900

Chargeable gains3,00010,500Chargeable gains3,00010,500Chargeable gains3,00010,500

363,800281,400363,800281,400363,800281,400

Less:Qualifying charitable donations(4,000)nilLess:Qualifying charitable donations(4,000)nilLess:Qualifying charitable donations(4,000)nil

Taxable total profits (TTP)359,800281,400Taxable total profits (TTP)359,800281,400Taxable total profits (TTP)359,800281,400

Q 23.5

This was used in VC5 - Corp Tax 1.pptx on 13 Dec 2016.18/19 Version - going to ram it into lecture 1.

Trading profitsTrading profits1819

Melville Page 357 Exercise 23.5PositionMelville Page 357 Exercise 23.5

A company has the following results for the year to 31 March 2017:1.5cmA company has the following results for the year to 31 March 2019:

££6cm££

Trading profits, after capital allowances1,561,400120%Trading profits, after capital allowances1,561,400

Bank deposit interest (account opened 1 April 2016)Bank deposit interest (account opened 1 April 2018)

Received 30 June 20161,820 Received 30 June 20181,820

Received 31 December 20163,670 Received 31 December 20183,670

Accrued to 31 March 20171,980 Accrued to 31 March 20191,980

Chargeable gain on sale of factory531,000Chargeable gain on sale of factory531,000

Dividends received from UK companies132,000Dividends received from UK companies132,000

Deed of covenant paybable annually to a charity:Deed of covenant paybable annually to a charity:

Paid 1 October 2016, for the year to 30 Sept 20179,000 Paid 1 October 2018, for the year to 30 Sept 20199,000

Less: Prepayment4,5004,500 Less: Prepayment4,5004,500

The charitable covenant began on 1 October 2016 and falls within the GiftThe charitable covenant began on 1 October 2018 and falls within the Gift

Aid scheme.Aid scheme.

Required:

Compute the taxable profits for the year.Compute the taxable profits for the year to 31 March 2019.

SolutionP575SolutionP575

The taxable total profits for the year to 31 March 2017 are as follows:The taxable total profits for the year to 31 March 2019 are as follows:

££

Trading income1,561,400Trading income1,561,400

Income from non-trading loan relationshipsIncome from non-trading loan relationships

(£1,820 + £3,670 + £1,980)7,470 (£1,820 + £3,670 + £1,980)7,470

Chargeable gains531,000Chargeable gains531,000

2,099,8702,099,870

Less: Qualifying charitable donations9,000Less: Qualifying charitable donations9,000

Taxable Total Profits2,090,870Taxable Total Profits2,090,870

Notes:Notes:

a)Interest receivable is taxed on the accruals basis.a)Interest receivable is taxed on the accruals basis.

b)Dividends received do not form part of a company's taxable totalb)Dividends received do not form part of a company's taxable total

profits.profits.

c)Gift Aid donations are relieved on the payments basis.c)Gift Aid donations are relieved on the payments basis.

Chargeable Accounting periods• Corporation tax is charged in respect of accounting periods.Chargeable accounting period• A period for which corporation tax is chargedPeriod of account• A period for which a company prepares a set of accounts. This can be

longer or shorter than 12 months.• The length of a chargeable accounting period can never exceed 12

months.• A period of account of 12 months or less is regarded as a chargeable

accounting period in its own right• A period of account exceeding 12 months is broken down into two or

more chargeable accounting periods each giving rise to a separate corporation tax assessment

5

CAPs in a long period of account• Profits allocated between chargeable accounting periods

as follows:• Trading profits - Time apportioned• Capital allowances - Computed for each period• Property income - Accruals basis• Interest income - Accruals basis• Capital gains - Period disposal occurs• Qualifying charitable donations - Period paid

6

Corporation tax rate• Financial years are denoted by the year in which they start, so

the year starting on 1 April 2019 is Financial Year (FY) 2019. • The rate of corporation tax for FY 2019 is 19%.

Summary of rates:FY 2016 20%FY 2017 19%FY 2018 19%FY 2019 19%FY 2020 19% (change from 2015 plan of 18%, 2016 plan

of 17%)7

ComputationExampleA company makes up accounts for the 21 months to 30 September 2020. The company’s results for this period of account are:

8

£Adjusted trading profits (before capital allowances) 630,000Non-trade loan interest receivable

Received 31 October 2019 600Received 30 April 2020 600Accrued to 30 September 2020 500

Chargeable gainsDisposal on 25 May 2019 2,300Disposal on 12 December 2019 700Disposal on 15 February 2020 10,500

Gift Aid donationsPaid 31 December 2019 4,000Accrued to 30 September 2020 3,000

Long

Long periods of account

Melville Page 352 example 3Included in lecture12/31/199/30/20

1920

£

Adjusted trading profits (before capital allowances)630,000

Non-trade loan interest receivable

Received 31 October 2019600

Received 30 April 2020600

Accrued to 30 September 2020500

Chargeable gains

Disposal on 25 May 20192,300

Disposal on 12 December 2019700

Disposal on 15 February 202010,500

Gift Aid donations

Paid 31 December 20194,000

Accrued to 30 September 20203,000

The loan interest receivable relates to a £12,000 loan made on812000

on 1 May 2019 at 10%10%

The company makes a £4,000 Gift Aid donation on 31 December

every year.

Show how the period of account will be divided into accounting periods

and compute the company's taxable total profits for each accounting

period (ignore capital allowances).

129

Solution

12 months to 31/12/199 months to 30/09/20

££

Trading income (12:9)360,000270,000

Income from non-trading relationship800900

Chargeable gains3,00010,500

363,800281,400

Less:Qualifying charitable donations(4,000)nil

Taxable total profits (TTP)359,800281,400

ComputationNotesThe loan interest receivable relates to a £12,000 loan made on 1 May 2019 @ 10%.The company makes a £4,000 Gift Aid donation on 31 December every year.Required:Show how the period of account will be divided into chargeable accounting periods and compute the company’s taxable total profits for each chargeable accounting period (ignore capital allowances).

9

12 months to 31/12/19

9 months to 30/09/20

£ £Trading income (12:9) 360,000 270,000Income from non-trading relationship 800 900Chargeable gains 3,000 10,500

363,800 281,400Less: Qualifying charitable donations (4,000) nil

Taxable total profits (TTP) 359,800 281,400

ComputationSolutionThere are two chargeable accounting periods – the year to 31 December 2019 and the nine months to 30 September 2020. The taxable profits for each chargeable accounting period are as follows:

1025 May 2019 £2,30012 Dec 2019 £ 700

£ 3,000

1 May - 31 Dec(£12,000 x 10% ÷ 12 x 8) = £800

Long



1920

£






Chargeable gains




Gift Aid donations




on 1 May 2019 at 10%10%


every year.




129

Solution


££

Trading income (12:9)360,000270,000



363,800281,400



ComputationSolution (continued)The loan interest is allocated on the accruals basis. Interest on the loan accrues at £100 per month, so 8 months (1 May – 31 Dec 2109) in the first accounting period and 9 months (1 Jan – 30 Sept 2020) in the second accounting period.The chargeable gains are allocated according to the date of disposal and the Gift Aid donations are allocated according to the date of payment. The accrued donations are not deductible until the accounting period in which they are paid.

11

Capital allowances• Allowances available:

– Written/writing down allowances (WDA).• 18%, 6%

– Annual Investment Allowance (AIA).• Pre 1 January 2019 - £200,000 maximum• Post 1 January 2019 - £1,000,000 maximum

– First Year Allowance (FYA).• Green cars (≤ 50g/km after 1 Apr 2018), energy saving plant, water efficient plant.

– Disposal of Assets – Balancing allowances and Balancing charges.• Normally deduct proceeds from pool (never more than cost)• Allowance/charge in single asset pool

– Structures and Buildings Allowance • 2018 Budget, 2% on eligible construction costs incurred on or after 29 Oct 2018.• Must be used for a qualifying activity

12

Capital allowances – corporation tax• Very similar to personal capital allowances except that:1. The tax year is different: the rates for WDA and AIA apply

from 1 April to 31 March for companies, as opposed to 6 April to 5 April for individual traders.

2. There is no adjustment for private use of an asset, instead the director/employee suffer a benefit in kind (BIK).

3. A company’s chargeable accounting period cannot exceed 12 months. If the period of account exceeds 12 months, it is split into two CAPs with a capital allowance calculation for each period prepared separately. The AIA and WDA must be time apportioned for the accounting period that is less than 12 months.

13

Apportioning AIA and WDA• AIA:

– £200,000 maximum to 31 December 2018.– £1,000,000 maximum 1 January 2019 – 31 December 2020.

1. Calculate the total amount of AIA for the chargeable accounting period (CAP)

2. Calculate the cap of the pre 1 January expenditure

14

Apportioning AIA and WDAExample:CAP – 12 months to 31 March 2019

15

Maximum AIA £1/4/2018 - 31/12/2018: 9/12 x £200,000 150,000 1/1/2019 - 31/3/2019: 3/12 x £1,000,000 250,000

Maximum AIA 400,000

Pre 31 Dec 2018 200,000

Cap all apportionment

Y/end6/30/19Y/end3/31/19

12/31/18200,00012/31/18200,000

1/1/191,000,0001/1/191,000,000

MonthsPeriod startMonthsPeriod start

127/1/186/30/19124/1/183/31/19

Maximum AIA£Maximum AIA£

61/7/2018 - 31/12/2018: 6/12 x £200,000100,00091/4/2018 - 31/12/2018: 9/12 x £200,000150,000

61/1/2019 - 30/6/2019: 6/12 x £1,000,000500,00031/1/2019 - 31/3/2019: 3/12 x £1,000,000250,000

Maximum AIA600,000Maximum AIA400,000

Pre 31 Dec 2018200,000Pre 31 Dec 2018200,000

94/1/198%124/1/198%

36%06%

0.0750.08

Sheet1

F2F - RAM IT IN - it will take timeCoronavirus Session 3

BrendaCeased5/31/195/31/18BerylCeased7/31/197/31/18

Terminal loss reliefPenult tax year end3/31/19Terminal loss reliefPenult tax year end3/31/19

16year to 30 June 201620,00026/30/1616year to 30 September 201622,00049/30/16

17year to 30 June 20178,000Pre per end6/30/1717year to 30 September 20179,000Pre per end9/30/17

18year to 30 June 20183,0006/30/186/30/1818year to 30 September 20184,2009/30/189/30/18

1911 months to 31 May 2019(22,000)111910 months to 31 Jul 2019(22,000)10

2020

The calculation of the terminal loss is as follows:The calculation of the terminal loss is as follows:

££

Trading loss 6/4/19 to 31/5/2019(22,000) x 2/11(4,000)Trading loss 6/4/19 to 31/7/2019(22,000) x 4/10(8,800)

Trading loss 1/6/2018 to 5/4/193,000 x 1/12 + (22,000) x 9/11(17,750)Trading loss 1/8/2018 to 5/4/194,200 x 2/12 + (22,000) x 6/10(12,500)

Overlap relief(6,500)Overlap relief(5,400)

(28,250)(26,700)

2016-172017-182018-192019-202016/172017/182018/192019/20

££££££££

Trading income20,0008,0003,000-Trading income22,0009,0004,200-

LessTerminal trade loss reliefLessTerminal trade loss relief

(i) in 2018-19(3,000)(i) in 2018/19(4,200)

(ii) in 2017-18(8,000)(ii) in 2017/18(9,000)

(iii) in 2016-17(17,250)Total claim(iii) in 2016/17(13,500)Total claim

-(28,250)-(26,700)

Net income2,750---Net income8,500---

Loss memorandum£

Trading loss 2019/2026,700

Utilised in 2018/19(4,200)

22,500

Utilised in 2017/18(9,000)

13,500

Utilised in 2016/17(13,500)

-

Tax YearBasis period£Tax YearBasis period£

2016-17year to 30 June 201620,0002016/17year to 30 September 201622,000

ERROR:#REF!year to 30 June 2017ERROR:#REF!2017/18year to 30 September 20179,000

ERROR:#REF!year to 30 June 2018ERROR:#REF!2018/19year to 30 September 20184,200

ERROR:#REF!11 months to 31 May 2019(22,000)2019/2010 months to 31 Jul 2019(22,000)

Noreen

Rehash of example 2 on page 40 of manual1920

Neil received the following income during the Tax Year 2016/17

£

Salary51,000

Bank Interest2,500

ISA interest300

Dividends2,600

PAYE paid

She paid PAYE of £7,700 on her salary during the year. Calculate7,700

her income tax liability for the 2016/17 tax year.

Non - Savings IncomeSavings IncomeDividend IncomeTotal Income

Employment income51,00051,000

Bank Interest2,5002,500

ISA interestEXEMPT-

Dividends2,6002,600

Total income51,0002,5002,60056,100

Less Personal Allowance 19/20(12,500)(12,500)

Taxable Income38,5002,5002,60043,600

Tax-liability:

Non - Savings Income:

Basic rate37,50020%7,50037,500

Higher rate1,00040%400150,000

Savings Income:

PSA5000%

Basic rate-40%-

Higher rate2,00040%800

Dividend Income:

Nil rate2,0000%-

Higher rate60032.5%195

Total tax liability8,895

Less PAYE(7,700)

Tax payable1,195

Main pool• Most capital expenditure will be included in the main pool.• Some cars are included in the main pool:• The capital allowances in relation to a car depend on the date

the car was purchased and the CO2 emissions:

16

Purchase Date ≤ 50 g/km ≤ 75 g/km51 -

110g/km76 -

130g/km >110 g/km >130 g/km1 April 2015

31 March 20181 April 2018

31 March 20191 April 2019

31 March 2020

Main pool 18%

Special rate pool 8%

100% FYAMain pool

18%Special rate

pool 6%

100% FYAMain pool

18%Special rate

pool 8%

100% FYA

Car table

Purchase Date≤ 50 g/km≤ 75 g/km51 - 110g/km76 - 130g/km>110 g/km>130 g/km

1 April 2015100% FYAMain pool 18%Special rate pool 8%

31 March 2018

On or after100% FYAMain pool 18%Special rate pool 8%20

1 April 201820

Cars do not qualify for AIA

Any asset with some private use will be in a single asset pool.

Purchase Date≤ 50 g/km≤ 75 g/km51 - 110g/km76 - 130g/km>110 g/km>130 g/km

1 April 2015100% FYAMain pool 18%Special rate pool 8%

31 March 2018

1 April 2018100% FYAMain pool 18%Special rate pool 8%20

31 March 201920

1 April 2019100% FYAMain pool 18%Special rate pool 6%20

31 March 202020

Apportioning AIA and WDA• WDA:

– Special rate pool 8% to 31 March 2019.– Special rate pool 6% from 1 April 2019.

Example:CAP – y/e 30 June 2019Lower rate:1/7/2018 – 31/3/2019 8% x 9/12 6.00%1/4/2019 – 30/6/2019 6% x 3/12 1.50%Rate for computation 7.50%

17

Gardenia LtdGardenia Ltd has always prepared its accounts to 31 December, but has decided to change its accounting date to 31 March. The company’s results for the 15 month period ending 31 March 2020 are as follows:1. The tax adjusted trading profit is £1,400,000. This is before taking account

of capital allowances.2. At 1 Jan 2019 the written down value on the main pool was £44,568.3. On 1 July 2019 the company bought its first ever company car. It was a

Ford car with emissions of 120g/km for the sales director. It cost £30,000.4. On 1 October 2019 the company bought a new machine for £400,000.5. On 1 January 2020 the company bought new office equipment for

£330,000.6. There is a property business profit of £90,000 for the 15 month period

ending 31 March 2020.18

Gardenia Ltd7. A qualifying charitable donation of £10,000 was made on 31 March 2020.

Required:Calculate Gardenia Ltd’s corporation tax liabilities in respect of the 15 month period ended 31 March 2020.

19

Solution – capital allowancesCAP – year to 31 December 2019

20

12 months to 31 December 2019 AIA Main PoolSpecial Rate

PoolCapital

AllowanceStep 1: WDV brought forward 44,568 -Step 2: Deduct disposals - -Balance 44,568 -Step 3: Add additionsAdditions not qualifying for AIACar 120 g/lm 30,000Additions qualifying for AIAEquipment 400,000 Less AIA (400,000) 400,000 Remaing balance of Additions -Pool balance 44,568 30,000

Step 4: WDA @ 18% (8,022) 8,022Step 4: WDA @ 6.5% (1,950) 1,950

Step 5:WDV carried forward 36,546 28,050Total Capital Allowances claimed 409,972

Long



1920

£






Chargeable gains




Gift Aid donations




on 1 May 2019 at 10%10%


every year.




129

Solution


££

Trading income (12:9)360,000270,000



363,800281,400



Gardenia Ltd CAs

1212/31/19

12 months to 31 December 2019FYAAIAMain PoolSpecial Rate PoolSingle Asset PoolCapital Allowance

Step 1: WDV brought forward44,568--

Step 2: Deduct disposals--

Balance44,568--

Step 3: Add additions

Additions not qualifying for AIA

Car 120 g/lm30,000

ERROR:#REF!ERROR:#REF!

Additions qualifying for AIA

Equipment400,000

Less AIA(400,000)400,000

Remaing balance of Additions-

Pool balance44,56830,000

Step 4: WDA @ 18% (8,022)-8,0228%0.250.02

Step 4: WDA @ 6.5%(1,950)1,9506%0.750.045

0.065

Step 5:WDV carried forward36,54628,050-

Total Capital Allowances claimed409,972

33/31/20

3 months to 31 March 2020FYAAIAMain PoolSpecial Rate PoolSingle Asset PoolCapital Allowance

Step 1: WDV brought forward36,54628,050-


Balance36,54628,050-


Additions qualifying for FYA

ERROR:#REF!- 0

Less AIA (100%)- 0- 0


ERROR:#REF!


Equipment330,000

Less AIA(250,000)250,0001,000,0000.25250000

Remaing balance of Additions80,000


Step 4: WDA @ 18% x 3/12(5,245)-5,245

Step 4: WDA @ 6.0% x 3/12(421)4216%



Gardenia Ltd comp

1212/31/1933/31/20151819

Corporation tax computationy/e 31 12 19p/e 31 3 203Proforma Computation££

££££9Tax Adjusted Trading IncomeX

Tax Adjusted Trading Income710,02824,334Corporation tax:y/e 31 12 19p/e 31 3 20Less: Trading Losses b/fX

££X

Rental Income: (12/15:3/15)72,00018,000FY 201819%3/1237,146Rental IncomeX

FY 201919%9/12111,4396,143X

Less:Less:

Qualifying Charitable Donationsnil(10,000)Corporation tax payable148,5856,143Rental losses(X)

nil(10,000)Current year trading losses(X)

Profits Chargeable to Corporation Tax (PCTCT)782,02832,334Losses carried back(X)


148585.326143.46Qualifying Charitable Donations(X)

Tax Adjusted Trading Profits££££(X)

Net Profit per accounts: (12/15:3/15)1,120,000280,000Profits Chargeable to Corporation Tax (PCTCT)X

Less:

Capital Allowances W1(409,972)(255,666)

(409,972)(255,666)Proforma Computation££

Tax Adjusted Trading Profits710,02824,334Net Profit per accountsX

Less:

Tax adjusted trading profit1,400,000Capital Allowances(X)

12/153/15(X)

1,120,000280,000Tax Adjusted Trading Profits

Rental profit90,000

72,00018,000

Solution – capital allowancesCAP – 3 months to 31 March 2020

21

3 months to 31 March 2020 AIA Main PoolSpecial Rate

PoolCapital

AllowanceStep 1: WDV brought forward 36,546 28,050 Step 2: Deduct disposals - -Balance 36,546 28,050Step 3: Add additionsAdditions qualifying for AIAEquipment 330,000 Less AIA (250,000) 250,000 Remaing balance of Additions 80,000Pool balance 116,546 28,050

Step 4: WDA @ 18% x 3/12 (5,245) 5,245Step 4: WDA @ 6.0% x 3/12 (421) 421

Step 5:WDV carried forward 111,301 27,629Total Capital Allowances claimed 255,666

Max AIA: £1,000,000 x 3/12 = £250,000

Long



1920

£






Chargeable gains




Gift Aid donations




on 1 May 2019 at 10%10%


every year.




129

Solution


££

Trading income (12:9)360,000270,000



363,800281,400



Gardenia Ltd CAs

1212/31/20




Balance44,568--



Car 120 g/lm30,000



Equipment400,000

Less AIA(400,000)400,000



Step 4: WDA @ 18% (8,022)-8,0228%0.250.02

Step 4: WDA @ 6.5%(1,950)1,9506%0.750.045

0.065



33/31/20




Balance36,54628,050-



ERROR:#REF!- 0

Less AIA (100%)- 0- 0


ERROR:#REF!


Equipment330,000

Less AIA(250,000)250,0001,000,0000.25250000



Step 4: WDA @ 18% x 3/12(5,245)-5,245

Step 4: WDA @ 6.0% x 3/12(421)4216%



Gardenia Ltd comp

1212/31/2033/31/20151819




££X


FY 201919%9/12111,4396,143X

Less:Less:








Less:




Less:


12/153/15(X)


Rental profit90,000

72,00018,000

ComputationTax adjusted trading profits:

Computation:

22

Tax Adjusted Trading Profits£ £ £ £

Net Profit per accounts: (12/15:3/15) 1,120,000 280,000Less:Capital Allowances W1 (409,972) (255,666)

(409,972) (255,666)Tax Adjusted Trading Profits 710,028 24,334

y/e 31 12 19 p/e 31 3 20

Corporation tax computation£ £ £ £

Tax Adjusted Trading Income 710,028 24,334Rental Income: (12/15:3/15) 72,000 18,000Less:Qualifying Charitable Donations nil (10,000)

nil (10,000)Profits Chargeable to Corporation Tax (PCTCT) 782,028 32,334

y/e 31 12 19 p/e 31 3 20

Long



1920

£






Chargeable gains




Gift Aid donations




on 1 May 2019 at 10%10%


every year.




129

Solution


££

Trading income (12:9)360,000270,000



363,800281,400



Gardenia Ltd CAs

1212/31/19




Balance44,568--



Car 120 g/lm30,000



Equipment400,000

Less AIA(400,000)400,000



Step 4: WDA @ 18% (8,022)-8,0228%0.250.02

Step 4: WDA @ 6.5%(1,950)1,9506%0.750.045

0.065



33/31/20




Balance36,54628,050-



ERROR:#REF!- 0

Less AIA (100%)- 0- 0


ERROR:#REF!


Equipment330,000

Less AIA(250,000)250,0001,000,0000.25250000



Step 4: WDA @ 18% x 3/12(5,245)-5,245

Step 4: WDA @ 6.0% x 3/12(421)4216%



Gardenia Ltd comp

1212/31/1933/31/20151819




££X


FY 201919%9/12111,4396,143X

Less:Less:






Tax Adjusted Trading Profitsy/e 31 12 19p/e 31 3 20(X)

££££Profits Chargeable to Corporation Tax (PCTCT)X

Net Profit per accounts: (12/15:3/15)1,120,000280,000

Less:




Less:


12/153/15(X)


Rental profit90,000

72,00018,000

Peartree

Date of disposalAssetProceedsCostDate of purchase

££

Chargeable gainsSaturday, April 27, 2019Painting5,5007,500Saturday, August 12, 2000

Revision lecuture to review - slide 53Tuesday, April 30, 2019Plot of land (2 acres)40,00090,000Friday, August 18, 2000

Peartree May 16 adapted(note 1)(6 acres)

Saturday, November 02, 2019Shares (1,200)10,2007,250Saturday, June 06, 1998

a)Painting£Monday, February 10, 2020Antique Desk10,0003,500Thursday, June 14, 2001

Sales proceeds (deemed)6,000Sunday, March 01, 2020Office Building182,50070,000Sunday, March 03, 2002

Less: Acquisition cost7,500(note 2)

Unindexed gain(1,500)270.6Apr-17

Less: indexation allowance170.5Aug-00

On acquisition costRelevant RPI:

270.6 - 170.5=0.587 x £7,500=nil0.5874403June 1998163.4Jun-98

170.5August 2000170.5Aug-00

June 2001174.4Jun-01

Allowable loss(1,500)Allowable lossMarch 2002174.5Mar-02

December 2017278.1Dec-17

orDeemed disposal value6,000November 2019278.1Nov-19

Less: Acquisition cost(7,500)February 2019278.1Feb-19

March 2019278.1Mar-19

Allowable loss(1,500)

b)Plot of land

Acquisition cost90,000270.6Apr-17

Sales proceeds40,000

Incidental sale costs

Remaining value of asset98,000

Chargeable gain calculation:£

Disposal value40,000

Incidental costs of disposalnil

Net proceeds40,000


Value disposed of40,000

Total of disposal value & remainder value138,000

Allowable cost26,087

Unindexed gain13,913


On acquisition cost

270.6 - 170.5=0.587 x £26,087=13,9130.58715,313

170.5

Chargeable gainnil

c)|Shares£


Less: Acquisition cost7,250

Unindexed gain2,950274Nov-17

Less: indexation allowance163.4Jun-98

On acquisition cost

274.0 - 163.4=0.677 x £7,250=2,9500.6774,908

163.4

Chargeable gainnil

d)Antique table£



Unindexed gain6,500275.5Feb-18


On acquisition cost

275.5 - 174.4=0.580 x £3,500=2,0300.582,030

174.4

Chargeable gain4,470

orDisposal value10,000

Chattels exemption limit(6,000)

Excess4,000

5/3 of excess6,667


e)Office Building££



Enhancement cost38,000108,000


Less: indexation allowance

On acquisition costMar-02

276.0 - 174.5=0.582 x 70,000=40,7400.582Mar-18276.0174.5

174.5

On enhancement April 2015Apr-15

276.0 - 258.0=0.070 x 38,000=2,66043,400258.0

258.0


Total chargeable gains£

Painting(1,500)

Plot of landnil

Sharesnil

Antique table4,470

Office Building31,100

Total for year34,070

Less: Capital losses b/f(39,560)

Chargeable gain for inclusion in PCTCT(5,490)

Capital losses c/fnil

Long



1920

£






Chargeable gains




Gift Aid donations




on 1 May 2019 at 10%10%


every year.




129

Solution


££

Trading income (12:9)360,000270,000



363,800281,400



Gardenia Ltd CAs

1212/31/19




Balance44,568--



Car 120 g/lm30,000



Equipment400,000

Less AIA(400,000)400,000



Step 4: WDA @ 18% (8,022)-8,0228%0.250.02

Step 4: WDA @ 6.5%(1,950)1,9506%0.750.045

0.065



33/31/20




Balance36,54628,050-



ERROR:#REF!- 0

Less AIA (100%)- 0- 0


ERROR:#REF!


Equipment330,000

Less AIA(250,000)250,0001,000,0000.25250000



Step 4: WDA @ 18% x 3/12(5,245)-5,245

Step 4: WDA @ 6.0% x 3/12(421)4216%



Gardenia Ltd comp

1212/31/1933/31/20151819




Rental Income: (12/15:3/15)72,00018,000££X

Less:FY 201819%3/1237,146Rental IncomeX

Qualifying Charitable Donationsnil(10,000)FY 201919%9/12111,4396,143X

nil(10,000)Less:

Profits Chargeable to Corporation Tax (PCTCT)782,02832,334Corporation tax payable148,5856,143Rental losses(X)








Less:




Less:


12/153/15(X)


Rental profit90,000

72,00018,000

Peartree


££











270.6 - 170.5=0.587 x £7,500=nil0.5874403June 1998163.4Jun-98

170.5August 2000170.5Aug-00

June 2001174.4Jun-01





March 2019278.1Mar-19


b)Plot of land








Net proceeds40,000







On acquisition cost

270.6 - 170.5=0.587 x £26,087=13,9130.58715,313

170.5

Chargeable gainnil

c)|Shares£





On acquisition cost

274.0 - 163.4=0.677 x £7,250=2,9500.6774,908

163.4

Chargeable gainnil

d)Antique table£





On acquisition cost

275.5 - 174.4=0.580 x £3,500=2,0300.582,030

174.4




Excess4,000

5/3 of excess6,667









276.0 - 174.5=0.582 x 70,000=40,7400.582Mar-18276.0174.5

174.5


276.0 - 258.0=0.070 x 38,000=2,66043,400258.0

258.0



Painting(1,500)

Plot of landnil

Sharesnil

Antique table4,470






LiabilityCorporation tax payable:

23

Corporation tax: y/e 31 12 19 p/e 31 3 20£ £

FY 2018 19% 3/12 37,146FY 2019 19% 9/12 111,439 6,143

Corporation tax payable 148,585 6,143

Long



1920

£






Chargeable gains




Gift Aid donations




on 1 May 2019 at 10%10%


every year.




129

Solution


££

Trading income (12:9)360,000270,000



363,800281,400



Gardenia Ltd CAs

1212/31/19




Balance44,568--



Car 120 g/lm30,000



Equipment400,000

Less AIA(400,000)400,000



Step 4: WDA @ 18% (8,022)-8,0228%0.250.02

Step 4: WDA @ 6.5%(1,950)1,9506%0.750.045

0.065



33/31/20




Balance36,54628,050-



ERROR:#REF!- 0

Less AIA (100%)- 0- 0


ERROR:#REF!


Equipment330,000

Less AIA(250,000)250,0001,000,0000.25250000



Step 4: WDA @ 18% x 3/12(5,245)-5,245

Step 4: WDA @ 6.0% x 3/12(421)4216%



Gardenia Ltd comp

1212/31/1933/31/20151819




Rental Income: (12/15:3/15)72,00018,000££X

Less:FY 201819%3/1237,146Rental IncomeX

Qualifying Charitable Donationsnil(10,000)FY 201919%9/12111,4396,143X

nil(10,000)Less:

Profits Chargeable to Corporation Tax (PCTCT)782,02832,334Corporation tax payable148,5856,143Rental losses(X)








Less:




Less:


12/153/15(X)


Rental profit90,000

72,00018,000

Peartree


££











270.6 - 170.5=0.587 x £7,500=nil0.5874403June 1998163.4Jun-98

170.5August 2000170.5Aug-00

June 2001174.4Jun-01





March 2019278.1Mar-19


b)Plot of land








Net proceeds40,000







On acquisition cost

270.6 - 170.5=0.587 x £26,087=13,9130.58715,313

170.5

Chargeable gainnil

c)|Shares£





On acquisition cost

274.0 - 163.4=0.677 x £7,250=2,9500.6774,908

163.4

Chargeable gainnil

d)Antique table£





On acquisition cost

275.5 - 174.4=0.580 x £3,500=2,0300.582,030

174.4




Excess4,000

5/3 of excess6,667









276.0 - 174.5=0.582 x 70,000=40,7400.582Mar-18276.0174.5

174.5


276.0 - 258.0=0.070 x 38,000=2,66043,400258.0

258.0



Painting(1,500)

Plot of landnil

Sharesnil

Antique table4,470






Computation of gains and losses• The chargeable gains and allowable losses of a company are

computed in a similar way to those of an individual with the following distinctions:

a) The gain arising on the disposal of a chargeable asset by a company is reduced by “indexation allowance” (IA), which adjusts the gain to take account of inflation. Disposals after 31 Dec 2017 will use the Dec 2017 RPI figure of 278.1 for calculating the indexation allowance.

b) The share matching rules that are use when a company makes a disposal of shares or securities is different from the equivalent rules that apply when such a disposal is made by an individual.

24

Computation of gains and lossesc) Rebasing does not always apply when a company disposes of

an asset acquired before 31 March 1982.d) Entrepreneurs’ Relief is not available to companies.e) The principle private residence exemption does not apply to

companies. f) The chargeable gains are included in the company’s

chargeable profits figure and subject to Corporation Tax at 19% FY 2019 (19% FY 2018) as opposed to special rates as is the case with CGT.

25

Indexation allowance• Indexation allowance was introduced in 1982 with the

intention of ensuring that capital gains caused by inflation should not be charged to tax. Being phased out from Dec 2017.

• Indexation allowance is calculated separately for each item of allowable expenditure shown in a computation.

26

Indexation allowance• The indexation allowance available on an item of expenditure

is equal to the amount of that expenditure multiplied by an indexation factor, which is computed according to the following formula and is rounded to three decimal places:

RD - RIRI

Where: RD = Retail Prices Index (RPI) for the month of disposal, andRI is the RPI for the month in which the expenditure was incurred.

27

Shares or securities• The share matching rules which apply on a disposal of shares

or securities by an individual are different to those applied when a company makes a disposal of shares or securities.

• Company rules:1) Same day acquisitions2) Previous nine days (FIFO basis)3) S 104 holding (for companies this is the pool of shares

acquired on or after 1 April 1982)

28

Restrictions on indexation allowance• No indexation allowance is available in respect of any

incidental costs of disposal, even if they were incurred prior to the month of disposal.

• Indexation allowance cannot be used to convert a gain into a loss. Therefore, if the available indexation allowance exceeds the unindexed gain, the indexation allowance is restricted so as to give neither a gain or a loss.

• Indexation cannot be used to increase an unindexed loss. If there is an unindexed loss on a disposal then the indexation allowance is nil.

29

Q6 Summer 2016 Peartree Ltd - adaptedAs a consequence of yet another difficult trading year Peartree Ltd took the opportunity to sell off a number of company assets to ease significant cash flow problems. Disposals in the year to 31 March 2020 have included the following:

30

Date of disposal Asset Proceeds Cost Date of purchase£ £

27 April 2019 Painting 5,500 7,500 12 August 200030 April 2019 Plot of land (2 acres) 40,000 90,000 18 August 2000

(note 1) (6 acres)02 November 2019 Shares (1,200) 10,200 7,250 06 June 199810 February 2020 Antique Desk 10,000 3,500 14 June 200101 March 2020 Office Building 182,500 70,000 03 March 2002

(note 2)

Long



1920

£






Chargeable gains




Gift Aid donations




on 1 May 2019 at 10%10%


every year.




129

Solution


££

Trading income (12:9)360,000270,000



363,800281,400



Gardenia Ltd CAs

1212/31/20




Balance44,568--



Car 120 g/lm30,000



Equipment400,000

Less AIA(400,000)400,000



Step 4: WDA @ 18% (8,022)-8,0228%0.250.02

Step 4: WDA @ 6.5%(1,950)1,9506%0.750.045

0.065



33/31/20




Balance36,54628,050-



ERROR:#REF!- 0

Less AIA (100%)- 0- 0


ERROR:#REF!


Equipment330,000

Less AIA(250,000)250,0001,000,0000.25250000



Step 4: WDA @ 18% x 3/12(5,245)-5,245

Step 4: WDA @ 6.0% x 3/12(421)4216%



Gardenia Ltd comp

1212/31/2033/31/20151819




££X


FY 201919%9/12111,4396,143X

Less:Less:








Less:




Less:


12/153/15(X)


Rental profit90,000

72,00018,000

Peartree


££






Sales proceeds5,500Sunday, March 01, 2020Office Building182,50070,000Sunday, March 03, 2002





270.6 - 170.5=0.587 x £7,500=nil0.5874403June 1998163.4Jun-98

170.5August 2000170.5Aug-00

June 2001174.4Jun-01


April 2019278.1Apr-19



March 2019278.1Mar-19


b)Plot of land








Net proceeds40,000







On acquisition cost

270.6 - 170.5=0.587 x £26,087=13,9130.58715,313

170.5

Chargeable gainnil

c)|Shares£





On acquisition cost

274.0 - 163.4=0.677 x £7,250=2,9500.6774,908

163.4

Chargeable gainnil

d)Antique table£





On acquisition cost

275.5 - 174.4=0.580 x £3,500=2,0300.582,030

174.4




Excess4,000

5/3 of excess6,667









276.0 - 174.5=0.582 x 70,000=40,7400.582Mar-18276.0174.5

174.5


276.0 - 258.0=0.070 x 38,000=2,66043,400258.0

258.0



Painting(1,500)

Plot of landnil

Sharesnil

Antique table4,470






Q6 Summer 2016 Peartree Ltd - adaptedNote:1. The value of the remaining 4 acres is estimated to be £98,000.2. The office building was purchased in March 2002 at a cost of

£70,000 but was further improved and extended in April 2015 at a cost of £38,000.

3. Capital losses b/f amount to £39,560.

31

Relevant RPI:June 1998 163.4August 2000 170.5June 2001 174.4March 2002 174.5December 2017 278.1

Long



1920

£






Chargeable gains




Gift Aid donations




on 1 May 2019 at 10%10%


every year.




129

Solution


££

Trading income (12:9)360,000270,000



363,800281,400



Gardenia Ltd CAs

1212/31/20




Balance44,568--



Car 120 g/lm30,000



Equipment400,000

Less AIA(400,000)400,000



Step 4: WDA @ 18% (8,022)-8,0228%0.250.02

Step 4: WDA @ 6.5%(1,950)1,9506%0.750.045

0.065



33/31/20




Balance36,54628,050-



ERROR:#REF!- 0

Less AIA (100%)- 0- 0


ERROR:#REF!


Equipment330,000

Less AIA(250,000)250,0001,000,0000.25250000



Step 4: WDA @ 18% x 3/12(5,245)-5,245

Step 4: WDA @ 6.0% x 3/12(421)4216%



Gardenia Ltd comp

1212/31/2033/31/20151819




££X


FY 201919%9/12111,4396,143X

Less:Less:








Less:




Less:


12/153/15(X)


Rental profit90,000

72,00018,000

Peartree


££






Sales proceeds5,500Sunday, March 01, 2020Office Building182,50070,000Sunday, March 03, 2002





270.6 - 170.5=0.587 x £7,500=nil0.5874403June 1998163.4Jun-98

170.5August 2000170.5Aug-00

June 2001174.4Jun-01





March 2019278.1Mar-19


b)Plot of land








Net proceeds40,000







On acquisition cost

270.6 - 170.5=0.587 x £26,087=13,9130.58715,313

170.5

Chargeable gainnil

c)|Shares£





On acquisition cost

274.0 - 163.4=0.677 x £7,250=2,9500.6774,908

163.4

Chargeable gainnil

d)Antique table£





On acquisition cost

275.5 - 174.4=0.580 x £3,500=2,0300.582,030

174.4




Excess4,000

5/3 of excess6,667









276.0 - 174.5=0.582 x 70,000=40,7400.582Mar-18276.0174.5

174.5


276.0 - 258.0=0.070 x 38,000=2,66043,400258.0

258.0



Painting(1,500)

Plot of landnil

Sharesnil

Antique table4,470






Q6 Summer 2016 Peartree Ltd - adaptedRequired:1. Calculate the chargeable gains or capital loss on each disposal

in the accounting period.(18 marks)

2. Calculate the total chargeable gain for inclusion in calculating the PCTCT for Y/E 31 March 2020.

(2 marks)

32

Painting27 April 2019Proceeds £5,500 Cost £7,500 12 Aug 2000.Two things:1. Painting is a chattel – cost more than £6,000 but sold for less

than £6,000 so allowable loss will be restricted.2. Indexation cannot increase an unindexed loss, so no need to

worry about indexation.

33

Chattels exemptionPainting

• Non wasting chattels because wasting chattels are exempt from CGT

34

£6,000 or less More than £6,000

£6,000 or less Exempt

Allowable loss, but proceeds are deemed to be £6,000

More than £6,000

Lower of: - Normal CGT rules - 5/3 x (gross proceeds - £6,000)

Normal CGT rulesSal

es P

roce

eds

Cost

Sheet3

Non-wasting chattels.Non-wasting chattels.

Sales ProceedsCostSales ProceedsCost

£6,000 or lessMore than £6,000£6,000 or lessMore than £6,000

£6,000 or lessExemptAllowable loss, but proceeds are deemed to be £6,000£6,000 or lessExemptAllowable loss, but proceeds are deemed to be £6,000

More than £6,000Lower of: Normal CGT rules 5/3 x (gross proceeds - £6,000)Normal CGT rulesMore than £6,000Lower of: - Normal CGT rules - 5/3 x (gross proceeds - £6,000)Normal CGT rules

Sheet2




Net proceeds£X






Jim


Disposal proceeds90,000

Less incidental costs of disposal

Estate agent's fees(900)

Legal fees(750)(1,650)

Net proceeds88,350


Acquisition cost(60,000)

Incidental costs of acquisition

Property survey(250)

Legal fees(600)

Ehancement expenditure(20,000)(80,850)

Chargeable Gain7,500

Alan

Assets held on 31 March 1982


Michael Thompson: Michael Thompson:Example 4 is assets with negligible value which I don't see in manual.

a)Alan

Acquisition costApr-782,000

Disposal proceedsJan-1729,500

31 March 1982 market value14,200




31 March 1982 market value(14,200)(14,200)


Overall gain (without rebasing)



Gain27,500

b)Alan



31 March 1982 market value500




31 March 1982 market value(500)(500)


Overall gain (without rebasing)



Gain27,500

c)Alan



31 March 1982 market value32,000




31 March 1982 market value(32,000)(32,000)

Allowable Loss(2,500)

Overall gain (without rebasin

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