Land

Re:Land

To calculate the cost for part disposals you need to use the formula:

                A / (A+B) X Cost.

Where: A is the proceeds on sale, and
             B is the value of the remaining land

So assuming you own 10 acres of land purchased for £10,000 in May 2000 and sold 4 acres for £20,000 in May 2006 with the remaining 6 acres being valued at £30,000, the computation will be:

Proceeds = £20,000
Cost £((20,000/(20,000 + 30,000) X 10,000) = £4,000
Chargeable Gain (before taper) = £16,000

For a full dispoal of land it is just Proceeds - cost etc.

Hope this helps
Tom

Re:Land

Share disposals - now there's a question. Here are a few notes:

Working out which share are disposed of
To decide which shares a person has sold, you compare them to aquisitions in the following order:
1. Shares purchased on the same day
2. Shares sold in the following 30 days after the sale
3. Shares purchases after 6 April 1998 (on a LIFO basis)
4. Shares purchased between 6 April 1982 and 5 April 1998.
5. Shares purchased before April 1982 (not sure if AAT deal with this one though).

So, say you sold 5,000 share on 01.10.06 which has been purchased as follows:
    2,000 on 01.01.95
    1,500 on 01.01.97
       500 on 01.10.06 and
    2,000 on 10.10.06
You would be assumed to have sold the share purchased on 01.10.06 and 10.10.06 and well as 2,500 from the 1985 Pool. You would calculate gains on each of them as though they were 3 seperate disposals, not one of 5,000.

Calculating the Gain
With 1. 2. and 3. above it is pretty easy:
      Proceeds - Cost = Gain

With 4. you need to create the '1985 Pool'. This contains the heading:
      Date of Purchase      No Purchased      Cost       Indexation Allowance      Indexed Cost

You then add all the shares purchased and disposed of between 6 April 1982 and 5 April 1998. You calculated indexation allowance each time the 'cost' changes (i.e. when shares are bought or sold).
You can then use the indexed cost at 5 April 1998 to calculate the gain.
For example, assumed in the 1985 pool there were 2000 shares with a indexed cost of £10,000 and that 1000 of these were sold for £20,000, the gain would be:
Proceeds = £20,000
Less: Indexed cost £10,000 X 1/2 = £5,000
Chargeable gain = £15,000

I don't think the AAT deal with 5. (for which you will have to compare the cost to 1982 market value etc.) However, if you find that they do deal with this, I will try to explain it.

Sorry if there seems to be a lot, but I can't think of how else to explain the basic rules. I found the best way to learn the was to do as many questions as possible, especially the 'Pool' questions.

Re:Land

I've just put my notes on this up here , Paul. Pretty much what twd said but a bit more long winded

Chris