ExpertHard2 marksMultiple Choice
ACCA · Question 06 · Chargeable gains for individuals
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?
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:
A.
£4,200
B.
£2,000
C.
£1,200
D.
£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.
Practice the full ACCA TX — Taxation Practice Exam 6
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