Home For AAT student members AQ 2013 AAT Level 4 (Level 8 in Scotland)

Indexation of Disposal of shares Bus. Tax

anthony_12canthony_12c Feels At HomeRegistered Posts: 40
Hi, i am struggling to understand how to arrive at a figure when looking at the part disposal of shares. Specifically Question 4.5 from the Osborne books for Business taxation, the figure concerns the disposal that occurs on the 1/1/2000, 5,000 shares that cost £14,167, but how do you arrive at the index cost of £16,384?

Other info:
Purchase 1/1/92 = 3,000 shares at £3.00 each
Purchase 1/1/95 = 12,000 shares at £3,50 each
Bonus issue on 1/1/99 1 to 5 basis therefore 3,000 shares
Disposal of 5,000 shares on 1/1/2000

I understand the answer until the indexation cost of the disposal, any help would be greatly appreciated.

Thanks

Comments

  • leonagleonag Feels At Home Registered Posts: 46
    No of Shares Cost Indexed Cost
    Purchase 3000 9000 9000
    Indexation to 1995 9000 x 0.077 693
    Sub Total 3000 9000 9693
    Purchase 12000 42000 42000
    Subtotal 15000 51000 51693
    Bonus shares 3000
    Subtotal 18000 51000 51693
    indexation to 2000 51693 x 0.141 7289
    Subtotal 18000 51000 58982
    Disposal 5000 (51000/18000 x 5000) (58982/18000x5000)
    = 14167 =16384
  • leonagleonag Feels At Home Registered Posts: 46
    There were 3 distinct columns when I wrote that out. The first number on each line is Number of shares the second is cost, and the third is indexed cost. The figure £14167 is derived from (51000/18000 x 5000) and the indexed cost of £16384 from (58982/18000x5000).

    Leona
  • anthony_12canthony_12c Feels At Home Registered Posts: 40
    thanks for your reply, it really helped
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