special rules for chattels

meibaker

1.chattels sold at a gain for over £6,000, and the gain will limited to 5/3 (proceeds -£6,000)
so is that mean if the actually gain is over £6,000 then this limited is apply?
or is that mean if the chattels sold for a gain, but the proceeds is over £6,000?
i am really confused as i though it should be the actually gain over £6,000, but in one of the activities, david sold an antique dresser for £6,900 , the dresser was bought for £3,000 the answer is as following
Dresser disposal June 2009:
Proceeds 6,900
less cost (3,000)
Gain 3,900
But gain limited to 5/3 (£6,900 – £6,000) = £1,500.
how come this applies to limited rules then as the gain is clearly £3,900 not over £6.000?
2. chattels sold at a loss for less than £6,000, so if the chattel had been acquired for £6,000 then the loss would be limited by substituting £6,000 for the actual proceeds in the calculation
also in one of the activities, he sold a antique table for £12,000 he had bought it for £13,500
the answers is
proceeds £12,000
less cost £13,500
loss (£1,500)
but why this is not applies to the deemed proceeds then??

angharadmai

1. Chattels sold for over £6000 but bought for less than £6000 have their gain limited to 5/3x(proceeds-£6000) regardless of the amount of gain.

2. Not completely sure about this one but think it's because the proceeds weren't under £6000. If the proceeds would have been under £6000 then the deemed proceeds would be £6000 i.e. reducing the loss.

Hope this helps

Angharad

timgriff

Hi, I don’t know if this helps as I’ve been struggling with this myself but I’ve written this down to help remember the rules:


Cost over £6000, proceeds over £6000: Calc. gain as a Normal asset
Cost under £6000, proceeds under £6000: Exempt

Cost over £6000, proceeds under £6000: Proceeds deemed as £6000
Cost under £6000, proceeds over £6000: Gain restricted to:
Proceeds less £6000 x 5/3

So to remember: OVER:OVER, UNDER:UNDER, OVER:UNDER, UNDER:OVER (!!)

Answer For Q1: Proceeds = 6900
Cost = -3000 so it’s UNDER:OVER

Normally the gain would be 6900-3000 = 3900 but here the gain is restricted to:
Proceeds less 6000 x5/3 I.e. (6900-6000) x5/3 = 1500

Answer for Q2: Proceeds = 13500
Cost = 12000 so it’s OVER:OVER

It’s simply 13500 - 12000 = (1500) and then normally subject to an indexation allowance.

I hope that helps, I've been doing share pools all day and my head is fried!

meibaker

thanks guys for your help!
i am defo going to follow that fantastic technic! thanks again!