ExpertMedium2 marksMultiple Choice
ACCA · Question 04 · Chargeable gains for individuals
Section A: Objective Test
Julian sold an antique clock (a non-wasting chattel) for £7,200 in December 2023. He had originally purchased it for £3,000. What is the chargeable gain on the disposal of the antique clock?
Section A: Objective Test
Julian sold an antique clock (a non-wasting chattel) for £7,200 in December 2023. He had originally purchased it for £3,000. What is the chargeable gain on the disposal of the antique clock?
Answer options:
A.
£4,200
B.
£2,000
C.
£1,200
D.
£0
How to approach this question
Identify that the asset is a chattel. Since proceeds (£7,200) are greater than £6,000 and cost (£3,000) is less than £6,000, the special chattels rule applies. Calculate the actual gain: £7,200 - £3,000 = £4,200. Calculate the restricted gain: 5/3 x (£7,200 - £6,000) = £2,000. The chargeable gain is the lower of the two.
Full Answer
B.£2,000✓ Correct
The antique clock is a non-wasting chattel. Because the gross proceeds (£7,200) exceed £6,000, it is not exempt. However, marginal relief applies. The gain is restricted to a maximum of 5/3rds of the excess of the gross proceeds over £6,000.
Actual gain = £7,200 - £3,000 = £4,200.
Restricted gain = 5/3 x (£7,200 - £6,000) = £2,000.
The chargeable gain is the lower figure, which is £2,000.
Common mistakes
Forgetting to compare the restricted gain with the actual gain, or applying the 5/3 fraction incorrectly.
Practice the full ACCA TX — Taxation Practice Exam 5
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