Capital Gain Tax. AAT Task 11 Sample Paper

alexnwa

Hello, am struggle to solve this question regarding Capital Gain Tax. Here is the questions and answer below:

The following information is available about four taxpayers who sold capitals assets during 2016/2017. These are the only assets that they sold during 2016/2017, none of which relate to residential.

Taxpayer Sold to Proceeds Market Value Cost Other taxable income

Alex Husband 28750 42600 12000 47500

Donna Brother 19000 22000 7500 30000

Carl Stranger 64800 64000 44050 54600

Bridget Friend 26000 28000 9500 18430



Calculate the amount of capital gains tax payable for each taxpayer

Taxpayer Amount of capital gains tax payable

Alex 0

Donna 480

Carl 1930

Bridget 540

Please, i need your assistance on the solution.

ncraggs

Hope this helps:

Alex – Disposals between spouses / civil partners are no gain / no loss transfers. Asset would be deemed to be transferred at cost price of £12,000. No gain on transfer so tax is £0.

Donna – Transfer is to a connected person so Market Value is substituted for cost
Deemed proceeds £22000
Cost £ 7500
Gain £14500
Annual Exemption £11100
Taxable Gain £ 3400

Rate of tax depends on other income.
Donna has other income of £30000

BR band is £1 - £32000 at 10% for capital gains
HR band is £32001 - £150000 at 20% for capital gains

Remaining BR band is £32000 less £30000 of other income so £2000 remaining to be taxed at 10% giving tax of £200.
The remaining gain of £3400 - £2000 = £1400 and is taxed at higher rate of 20% so £280.
Total tax = £200 + £280 = £480

Carl
Proceeds £64800
Cost £44050
Gain £20750
Annual
Exemption £11100
TAXABLE GAIN £ 9650

Carl has used his full BR band with other income of £54600. His entire gain will be taxed at Higher rate of 20%.

Tax at 20% £ 1930


Bridget
Friends are not connected persons so normal gains computation
Proceeds £26000
Cost £ 9500
Gain £16500
Annual
Exemption £11100
TAXABLE GAIN £ 5400
Bridget has used up £18430 of her BR band so she has £32000 - £18430 = £13570 remaining. This covers her gain so tax is £5400 x 10% BR tax = £540

alexnwa

Thank you for your in-depth explanation.

Rio

can someone please help with the sample 2 question 11
Mirror-chargeable gain £6120
Antique-allowable loss £12600
Shares-chargeable gain £12600
Painting- chargeable gain £16210
capital gains tax payable assuming she is a basic rate tax payer?
answer is £923???

CornishPixie

Hi Rio, you made a slight error in your figures above so I went back to the question in my book and saw that the allowable loss was 14600 not 12600.

6120 + 12600 + 16210 = 34930
Less personal allowance 34930 - 11100 = 23830
Less allowable loss 23830 - 14600 = 9230
Precious is a basic rate tax payer so CGT will be at 10%
9230 x 10% = 923

Hope that helps