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: Another partner, Sarah, sold her entire 30% share in the partnership to an external buyer, realizing a gain of £1,200,000. She has never previously claimed Business Asset Disposal Relief (BADR). Assuming all qualifying conditions are met, what is the Capital Gains Tax payable by Sarah on this disposal? (Assume she has used her annual exempt amount elsewhere and is a higher rate taxpayer).

Accepted Answer

Apply the BADR lifetime limit, which is £1,000,000. Tax the first £1,000,000 of the gain at the BADR rate of 10%. Tax the remaining gain (£200,000) at the standard higher rate for non-residential assets, which is 20%. Add the two tax amounts together.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Applying the 10% rate to the entire £1.2 million gain, forgetting the £1 million lifetime limit.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA TX — Taxation Practice Exam 5

More questions from this exam