Question 1

Section B: Case 3 - SteelForge Partners

Scenario: SteelForge Partners is a partnership manufacturing specialized alloys. On 1 May 2023, the partnership sold its old factory for £800,000, realizing a chargeable gain of £150,000. On 1 October 2023, they purchased a new factory for £700,000.

Question: The partnership also sold a piece of heavy machinery for £40,000. It originally cost £60,000. Capital allowances of £60,000 had been claimed on it. What is the chargeable gain or allowable loss on the disposal of this machinery for CGT purposes?

Accepted Answer

Calculate the basic CGT position: Proceeds - Cost. If it's a loss, apply the rule that allowable losses must be restricted by any capital allowances claimed on the asset. Since the capital allowances (£60k) exceed the loss (£20k), the loss is reduced to zero.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Claiming a £20,000 capital loss, forgetting the restriction for capital allowances.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA TX — Taxation Practice Exam 5

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