AAT online test paper 1 question 1.11 (Personal Tax mock)

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BradleyClaridge
BradleyClaridge Registered Posts: 30
in Personal Tax
Hello

I'm stuck on this question, I have got 3 out of the 4 right but for working out Donna I'm stuck.
I have been reading the text book I have and it says that if the person is a connected person then the sales proceeds are deemed to be at the market value.
Donna is selling her item to her brother.
The proceeds are £19,000, the market value is £22,000 and the cost is £7,500, the other taxable income is £30,000 making her a basic rate tax payer.
The answer they have given is £480.00
Any ideas how they got that figure?

Thank you
Bradley
I'm currently studying AAT Level 4! as part of my Finance Apprenticeship

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  • ammw90
    ammw90 Registered Posts: 24
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    Hi Bradley

    I am sure you've found out the answer by now but just in case -

    Market Value must be used so -
    Market Value £22,000, less cost £7,500 = net proceeds £14,500
    less annual exempt amount (11,100) that gives you gain of £3400.

    Her other taxable income is £30,000 therefore there is £2,000 remaining in the basic rate therefore £2000 will be in basic rate (10%) and the excess £1,400 (£3400-£2000) will be in higher rate (20%)

    £2,000 x 10% = £200
    £1,400 x 20% = £280
    £200 + £280 = £480

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