Business tax help

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Caff
Caff Registered Posts: 9 Regular contributor ⭐
in AAT Level 4 (Level 8 in Scotland)
Hello everyone, i need help with a quick question from osborne textbook. It's question 2.2 from practice assessment 2.

Travelers Ltd sold a valuable picture for £12,000 in april 2012. This was bought for £4000 in August 2000. the indexation factor from August 2000 to April 2012 was 0.442.

Complete the following computation:

Proceeds:
Cost:
Indexation allowance:
Gain:
chattel exemption:

I have my business exam on Monday, so I hope someone can help.

Thanks :)

Comments

  • Terdoo
    Terdoo Registered Posts: 144 Dedicated contributor 🦉
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    Re Business Tax

    Hi
    I Think
    £
    Proceed 12000

    Less Cost (4000)

    Indexed (4000 *0.442) (1768)
    Gain 6232

    Chattel (12000 -6000)/5*3 10000
    I hope this helps
  • Terdoo
    Terdoo Registered Posts: 144 Dedicated contributor 🦉
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    Hi Caff

    the answers given is based on FA 2011, therefore, not sure what the chattel exemption for FA12 is.
    :ohmy:
  • Caff
    Caff Registered Posts: 9 Regular contributor ⭐
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    Thank you for the answer Terdoo, that's what i thought it was as well. But according to answer in the back of the book it is:

    Proceeds: 12,000
    Cost; 4,000
    Index: 1,688
    Gain: 6,312
    Chattel exemption: 10,000

    Does anyone know how they got this answer?

    Thank you again for you help :)
  • Nps
    Nps Registered Posts: 782
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    Morning,

    The problem is the indexation factor. You have written 0.442 in the original OP, but the answer from the book looks like it has used 0.422 (1688/4000=0.422). Either you've copied it down wrong, or the answer in the book is calculated on the wrong indexation factor.

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