Help... Business Tax chattel question

Paisley

I have a question from the Osborne textbook:

Trevor Ltd sold a valuable picture for £12,000 in November 2009. This was bought for £4,000 in August 2000. The indexation factor from August 2000 to November 2009 was 0.270.

Answer:

Proceeds: £12,000
Cost: (£4,000)
Indexation allowance: (£1,080)
Gain: £6,920
Chattel restriction on gain: £10,000

No problem up to the £6,920 gain, but where has the £10,000 chattel restriction come from? Plus - state whether the chattel restriction will have any effect on the original gain?

Any help would be appreciated!

reddwarf

if you read on you'll see that chattels sold for a gain over £6000 are deemed proceeds of £6K

Proceeds limited to £6000 x5/3 = £10000

it won't affect he

Yoelle

I remember chattel rules by remembering this table-

Bought For Sold For Action
< £6000 < £6000 Exempt- no Capital Gains
< £6000 > £6000 Gain limited to 5/3 x (Proceeds less £6000)- use lowest figure
> £6000 < £6000 Loss limited by Proceeds deemed as £6000- ie £6000 less cost
> £6000 > £6000 Normal Capital Gains Rules (Proceeds less Cost)

Hope this helps!

Paisley

reddwarf wrote: »

if you read on you'll see that chattels sold for a gain over £6000 are deemed proceeds of £6K

Proceeds limited to £6000 x5/3 = £10000

it won't affect he

Ah, that bit didn't stick. Thanks reddwarf!

Paisley

Yoelle wrote: »

I remember chattel rules by remembering this table-

Bought For Sold For Action
< £6000 < £6000 Exempt- no Capital Gains
< £6000 > £6000 Gain limited to 5/3 x (Proceeds less £6000)- use lowest figure
> £6000 < £6000 Loss limited by Proceeds deemed as £6000- ie £6000 less cost
> £6000 > £6000 Normal Capital Gains Rules (Proceeds less Cost)

Hope this helps!

Very useful Yoelle. Thanks for sharing