An antique clock (a non-wasting chattel) was purchased for £3,000 and sold for £7,200. What is the chargeable gain before any annual exempt amount?

Answer options:

£4,200

£2,000

£1,200

£7,200

How to approach this question

Calculate the normal gain (Proceeds - Cost). Then calculate the marginal relief limit: 5/3 x (Gross Proceeds - £6,000). The chargeable gain is the lower of these two figures.

Full Answer

B.£2,000✓ Correct

Because the cost is < £6,000 and proceeds are > £6,000, the marginal relief rule applies. Normal gain = £7,200 - £3,000 = £4,200. Maximum gain = 5/3 x (£7,200 - £6,000) = £2,000. The chargeable gain is restricted to the lower amount, which is £2,000.

Common mistakes

Forgetting to compare the restricted gain with the normal gain and just assuming the normal gain applies.

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Practice the full ACCA TX — Taxation Practice Exam 6

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