ExpertMedium2 marksMultiple Choice
ACCA · Question 04 · Chargeable gains for individuals
Section A
Elena sold an antique weaving loom (a tangible movable property) for £6,500. She had originally purchased it at an auction for £3,000.
What is Elena's chargeable gain on the disposal of the loom, before any annual exempt amount?
Section A
Elena sold an antique weaving loom (a tangible movable property) for £6,500. She had originally purchased it at an auction for £3,000.
What is Elena's chargeable gain on the disposal of the loom, before any annual exempt amount?
Answer options:
A.
£3,500
B.
£833
C.
£500
D.
£0
How to approach this question
Identify the asset as a chattel. Since proceeds are > £6,000 but cost is < £6,000, calculate the actual gain and the marginal relief gain (5/3 x (Gross Proceeds - £6,000)). Take the lower figure.
Full Answer
B.£833✓ Correct
An antique loom is a chattel (tangible movable property). Because the proceeds (£6,500) exceed £6,000, it is not entirely exempt. The actual gain is £6,500 - £3,000 = £3,500. The marginal relief limits the gain to 5/3 x (Proceeds - £6,000) = 5/3 x (£6,500 - £6,000) = 5/3 x £500 = £833. The chargeable gain is the lower of the actual gain and the marginal relief limit, which is £833.
Common mistakes
Forgetting to apply the 5/3 fraction or using the actual gain instead of the restricted gain.
Practice the full ACCA TX — Taxation Practice Exam 2
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