PTC Dec 06 Shares help!

tezza.b

In the december 06 exam, theres a question on shares with 2 purchases and a rights issue all post 98 so theres no pool.
In the aat answers they deal with the 2 purchases seperately, the june 03 one first, then the december 98 one, producing 2 seperate gains.

However my college tutor answered this question by totalling up the 2 purchases to give 30000, then adding a rights issue of 3000 to give a total of 33000 shares at a total cost of £20700. He then did did the disposal of 15000 at a cost of (20700/33000 x 15000) = 9409. So thn finally sales proceeds of 16650-cost of 9409 to give a gain of 7241.

When i told him this was different to the aat answers he said its ok that was an old paper and theres a new rule and you can group them all together like he has done.
I am now not sure what to do! i understand both ways but want to know what will be expected of me in the exam tomorrow!
Can anyone help??!

po1988

Hello according to my teacher you do need to spilt them as they are brought at difference times, the tapering will be different hence giving different capital gain tax payable.

Only Pre April 1998 shares can be grouped and tapered at 9+1 years (60%)

Post april 1998 needs to be dealt separaty using the matching Rules and tapered according to purchase years.

What answers do you get when spiliting the two? from my tutors updated answers and my answers agree at

£3110 for June 2005 before taper at 100%
£2331 for Dec 2000 before taper at 80%

Hope this helps

tezza.b

yeah thats what i get

i just dont understand why he is showing us this different method and confusing me!

thanks for your help :001_smile:

po1988

Its ok, lol hate it when that happens, also on the updated answers the tutor has sometimes not updated it right so our answers are different which worrys me. But luckily its just a mistake the tutor has done not me.

Good luck for tomorrow anyway