CGT question help!

yan18

Hi, this Q is from FA2014 Workbook 9(b):

John has a capital loss brought forward of £2,500.
He has taxable income for the year of £25,000.
He sold an asset during the tax year for £21,000.
He had been left the asset when his grandfather died.
His grandfather had paid £6,000 for the asset, and it was valued at £9,500 at the time of death.

Complete the following sentences:
(1) The gain on the asset is ____
(2) The amount of loss that will be relieved is ____
(3) The capital gains tax payable is ____
(4) The loss to be carried forward to the next year is ____

Answers:
(1) £11,500 ---> £21,000 - £9,500
(2) £500
(3) £0
(4) £2,000

Can anyone help to explain the workings for Answers 2, 3 and 4 please?

Many thanks

wabisabi

Hi

It's a while since I studied this and still suffering from post traumatic stress disorder from the PTAX exam

Having said that, my understanding is that the annual the exempt amount (£11,000 in FA2014) is deducted from the gain first, then losses used to bring the gains to zero (so personal allowance is safeguarded):

£11,500 - £11,000 = £500 so only £500 of the loss b/f will be used up and there will be zero CGT payable.

£2,500 - £500 = £2,000 to carry forward.

Hope that helps.

yan18

wabisabi said:

Hi

It's a while since I studied this and still suffering from post traumatic stress disorder from the PTAX exam

Having said that, my understanding is that the annual the exempt amount (£11,000 in FA2014) is deducted from the gain first, then losses used to bring the gains to zero (so personal allowance is safeguarded):

£11,500 - £11,000 = £500 so only £500 of the loss b/f will be used up and there will be zero CGT payable.

£2,500 - £500 = £2,000 to carry forward.

Hope that helps.

Thank you so much for your help again!! I seem to keep missing the allowance/exemptions when answering these questions..!

Much appreciated ^^!

wabisabi

No problem I'm working on my ICAS report now, so it's good for me to look back and refresh my memory about PTAX.